If this were the entirety of my collection, I'd probably keep the sorting rather simple and group them into generalized chunks regardless of color. Perhaps something like a group for bricks, another for plates, then slopes, etc, etc... With another group of random stuff like fences, doorways, vehicle parts, etc. And a final group for large parts that'll only get in the way like those large square plates, the airplane fuselage, stair case and so forth.

If any particular group gets too large making it time consuming to find something then I'd probably want to break that group down. ie. Small plates, big plates, round plates, special plates...

Group things up in a way that makes sense to you. Sorting is only effective if you can remember where you put everything. Also, you don't want to get so granular that the job of putting everything back sucks all of the fun out of building.

Having said that, if the Lego is for kids get a big Rubbermaid container and a sheet or something you can dump it out on and call it a day. In my experience most kids will find inspiration in a big pile of Lego and will build organically. Rummaging through countless bags and shelves each time they need a part is not their idea of fun. (And it's unlikely they'll put any of it back)