Someone PLEASE tell me if you can set up a private tournament.


Yes but how you do it depends on what kind of event you want. For Live, you'll need to create a club, make it private and invite your friends. Then create the tournament for your club.
https://support.chess.com/article/1205-how-can-i-create-a-live-blitz-bullet-rapid-tournament
It should be noted that a minimum number of players have to be registered for a live tournament for it to start.
For Daily, you just make it invite only and invite your friends.
https://support.chess.com/article/119-how-do-i-create-a-tournament

There are live and daily tournaments with more than a thousand players.
Maybe you should play in a couple of daily chess tournaments so that you can see how they work.
https://support.chess.com/article/444-how-do-chesscom-daily-tournaments-work
https://support.chess.com/article/1205-how-can-i-create-a-live-blitz-bullet-rapid-tournament
https://support.chess.com/article/119-how-do-i-create-a-tournament