We play with Legos at the coffee table, kitchen table, playroom, bedrooms, EVERYWHERE, so they are stored in the family room—a good central location. But, if you have a specific place in your home where kids are playing with Legos that’s where they should be stored.
My kids follow the building instructions to a T, making the bricks perfectly match the photo on the front of the box, then, they play with their creation like any other toy. We have too many sets to store each individually, so they are stored by genre—all the Lego City sets are stored in one bin, Avenger sets are stored in another, and so on.
Instruction booklets can be stored right in the bins or in page protectors within a binder. FYI: You can find all Lego instructions by search on the Lego website, so no hard feelings if they end up in the recycling.
If you’re kids are more creative and toss the instruction booklets aside, you can probably get by with mixing up the sets in a large storage container. I would separate out specific building pieces into smaller bins, like car parts and Minifigures. Imaginations can run wild, but they won’t get frustrated looking for the 4th wheel for their Lego car.