Add Users and Assign Licenses in Microsoft 365

Learn how to add users and assign Microsoft 365 licenses through the Microsoft 365 Admin Center and Microsoft Entra ID, enabling secure access to services such as Outlook, Teams, OneDrive, and SharePoint.

Introduction

Managing users and licenses is one of the most common administrative tasks in Microsoft 365. Whether you're onboarding a new employee, provisioning access for a contractor, or setting up a service account, creating user accounts and assigning the correct licenses ensures users can access services such as Outlook, Microsoft Teams, OneDrive, SharePoint, and other Microsoft 365 applications.

All user identities in Microsoft 365 are stored and managed through Microsoft Entra ID (formerly Azure Active Directory), which serves as the central identity and access management platform for Microsoft cloud services.

Prerequisites

• You have a Microsoft 365 administrator role (Global Administrator, User Administrator, or License Administrator).
• Available licenses exist in your Microsoft 365 tenant.
• The user's information, including name and email address, is available.

Understanding User Accounts and Licensing

When a user account is created:

1. The account is stored in Microsoft Entra ID.
2. The user can sign in to Microsoft cloud services.
3. A Microsoft 365 license must be assigned before the user can access services such as:
   • Exchange Online (Outlook)
   • Microsoft Teams
   • OneDrive for Business
   • SharePoint Online
   • Microsoft Office Apps

Without a license, users can sign in but may not be able to use Microsoft 365 services

Step 1: Sign in to the Admin Center

1. Open the Microsoft 365 Admin Center.
2. Sign in using an administrator account.

Step 2: Create a New User

1. Navigate to:

Users → Active Users

1. Click Add a User.
2. Enter the following information:
   • First Name
   • Last Name
   • Display Name
   • Username

Configure password settings:

• Automatically generate password
• Require password change at first sign-in

Step 3: Assign Product Licenses

1. Select the user's location.
2. Choose the appropriate license.

Examples:

• Microsoft 365 Business Basic
• Microsoft 365 Business Standard
• Microsoft 365 Business Premium
• Microsoft 365 E3
• Microsoft 365 E5
• Microsoft 365 E7

1. Select the applications (apps) to enable or disable if required.

Example:

✔ Exchange Online
✔ Teams
✔ OneDrive
✔ SharePoint

Step 4: Review and Finish

1. Review the configuration.
2. Click Finish Adding.

The user account is now created and licensed.

Use Group-Based Licensing

Instead of assigning licenses individually:

1. Create a security group.
2. Assign licenses to the group.
3. Add users to the group.

Benefits:

• Simplified administration
• Consistent licensing
• Automatic license assignment
• Reduced human error

Enable MFA

After creating users:

• Enable Multi-Factor Authentication (MFA)
• Configure Conditional Access policies
• Enforce secure sign-in methods

Conclusion

Adding users and assigning licenses is a foundational Microsoft 365 administrative task. By creating accounts through Microsoft Entra ID and assigning the correct licenses, administrators ensure users have secure access to essential services such as Outlook, Teams, OneDrive, and SharePoint. For larger environments, consider using group-based licensing and PowerShell automation to simplify user provisioning and maintain consistency across the organization.