Can I set permissions for documents alone?

Yes, as a project administrator, you can set individual permissions only for documents.

The Document Admin permission allows a project member to create, edit and administer both documents and document folders. Though this does not include the delete permission, individual permissions to create, edit, and delete can be set separately for document folders and documents on the Documents Permissions page (Project Admin > Permissions > Edit Role > Documents). This is to restrict a project member from handling document folders or subfolders. For example, if you do not want a project member to create a document folder, but only create a document within a specific folder, you can set the 'Create/View' permission for documents alone. The available permissions are: