"Setup" (one word, noun/adjective) refers to the arrangement or organization of things, like a computer or party, while "set up" (two words, verb) means the act of arranging them; it can also mean starting a business, a deceptive situation, or refer to specific games/movies. To install software, you run its setup file; for a physical space, you arrange items; and in grammar, it's a noun, while "set up" is the action.
