Remove a favourite
Take the star off a file or folder, from Favorites or from the item's own menu. Nothing else about the item changes.
Taking a star off only shortens your list. The file or folder stays exactly where it was, with the same name, shares and labels, and colleagues see no difference at all.
From Favorites
Go to Favorites and find the row.
Select the filled orange star at the right-hand end of the row. Point at it first if you want to be sure: its name is Remove from favorites.
The row disappears at once, and the count at the top drops by one. There is no confirmation, because nothing has been lost: star the item again from its folder whenever you like.
From the item's own menu
Wherever the item has a row menu, in its folder, in Recent Files or on a label's list, select the three dots and then Unfavorite. It does the same thing.