There is no hard and fast rule for the best way to create workspaces.

A single workspace can be created that contains multiple team projects and their code, or a more targeted workspace that only contains a particular project. TFS was designed to allow for one or more workspaces on the same machine. The changes remain in the local workspace until are checked into TFS. It provides a private sandbox where code changes can be made without having to worry if the changes will affect other team members. One of the main reasons for workspaces is isolation. When you make changes to your code files, you are making those changes locally, to the files contained in your workspace. When code is checked out of TFS, the code is stored locally based off your workspace mappings. In essence, a workspace is a folder, or multiple folders, mapped to areas in TFS. A 'workspace' in TFS defines where the code resides locally. The code files need to be checked out from TFS to a local area on your computer.

Team Foundation Version Control stores your code, but when you begin to make changes to the code, those changes have to happen on your local machine. When working with Team Foundation Version Control, one of the concepts you need to understand is the workspace. Mickey explains the basics of workspaces in Team Foundation Version Control and how they can help you manage code changes. Inside TFS Team Foundation Version Control - Workspaces

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