Microsoft 365 is currently the most widely used productivity suite globally, but the variety of licensing options often leaves users uncertain about which plan to choose. This situation became even more complex after the January 2025 price increases for Personal and Family plans, which now include integrated AI features with Microsoft 365 Copilot functionality (60 monthly credits).
This guide provides a comprehensive breakdown of all Microsoft 365 license types and policies, helping you make the optimal choice for your specific needs.
1. Understanding the Microsoft 365 Licensing Framework
Microsoft 365 is broadly categorized into Personal/Family (consumer), Business, Enterprise, and Education plans. As a subscription-based service, users get access to premium desktop versions of popular apps like Word, PowerPoint, Excel, and Outlook, along with large-scale cloud storage and real-time collaboration features.
Microsoft rebranded Office 365 to Microsoft 365 starting in 2020. In February 2025, the name was changed again to Microsoft 365 Copilot, but Microsoft 365 is still officially used as the product name.
Key Changes
- Strengthened Subscription Model: Complete transition from traditional package licensing to subscription-based model
- AI Integration: Copilot features being gradually added to all plans
- Enhanced Security Features: Expansion of advanced security and compliance capabilities
- Pricing Policy Changes: Personal and Family plans increased by 3,600 KRW each starting January 2025
Subscription vs. Perpetual License Comparison
Microsoft 365 (Subscription)
- Monthly/annual subscription model
- Always up-to-date with latest features
- Includes cloud storage and services
- Multi-device simultaneous usage
- Technical support included
Office 2024 (Perpetual License)
- One-time purchase
- Single PC or Mac installation only
- No cloud services included
- No upgrade options – requires new purchase for future versions
2. Microsoft 365 Plans for Personal Users
Microsoft 365 Personal
| Item | Details |
|---|---|
| Price | $69.99/year or $6.99/month |
| Users | 1 user |
| Device Installation | Up to 5 devices simultaneously (PC, Mac, mobile, tablet) |
| Cloud Storage | 1TB OneDrive |
| Included Apps | Word, Excel, PowerPoint, OneNote, Outlook, Access (Windows only), Publisher (Windows only) |
| Special Features | Microsoft 365 Copilot with 60 monthly credits |
| Security Features | Microsoft Defender, ad-free secure email |
Microsoft 365 Family
| Item | Details |
|---|---|
| Price | $99.99/year or $9.99/month |
| Users | 1-6 users |
| Device Installation | Each user can sign in to up to 5 devices simultaneously |
| Cloud Storage | Up to 6TB secure cloud storage (1TB per user) |
| Included Apps | Word, Excel, PowerPoint, OneNote, Outlook, Access (Windows only), Publisher (Windows only) |
| Special Features | Microsoft 365 Copilot with 60 monthly credits (AI features available only to subscription owner, not shareable) |
| Security Features | Microsoft Defender, ad-free secure email |
Microsoft 365 Basic
| Item | Details |
|---|---|
| Price | $1.99/month |
| Cloud Storage | 100GB OneDrive |
| Included Apps | Web versions of Office apps (Word, Excel, PowerPoint) |
| Note | Launched January 2023, replacing the standalone OneDrive 100GB plan |
3. Microsoft 365 Business Plans
Business plans are designed for organizations with up to 300 users.
Microsoft 365 Business Basic
| Item | Details |
|---|---|
| Price | $6.00/user/month |
| User Limit | Up to 300 users |
| Included Apps | Web and mobile versions of Word, Excel, PowerPoint |
| Exchange Online (50GB mailbox) | |
| Cloud Storage | OneDrive for Business (1TB) |
| Collaboration Tools | Microsoft Teams*, SharePoint |
| Management Features | Basic device management |
Microsoft 365 Business Standard
| Item | Details |
|---|---|
| Price | $12.50/user/month |
| User Limit | Up to 300 users |
| Included Apps | Desktop Word, Excel, PowerPoint, OneNote, Outlook |
| Exchange Online (50GB mailbox) | |
| Cloud Storage | OneDrive for Business (1TB) |
| Collaboration Tools | Microsoft Teams*, SharePoint |
| Additional Features | Microsoft Bookings, Microsoft Forms |
Microsoft 365 Business Premium
| Item | Details |
|---|---|
| Price | $22.00/user/month |
| User Limit | Up to 300 users |
| Included Apps | All Business Standard features |
| Advanced Security | Microsoft Intune and Azure Information Protection |
| Additional Security | Microsoft Defender for Business |
| Compliance | Azure Information Protection |
Microsoft 365 Apps for Business
| Item | Details |
|---|---|
| Price | $8.25/user/month |
| Included Apps | Desktop Office apps only (Word, Excel, PowerPoint, OneNote, Outlook, Access, Publisher) |
| Teams Included | Teams not included – separate purchase required* |
| Cloud Storage | OneDrive for Business (1TB) |
Important Teams Licensing Policy Change (Effective April 1, 2024):
*Starting April 1, 2024, Microsoft implemented a global change to the Microsoft 365/Office 365 subscription structure:
- New subscribers must purchase Teams-excluded versions and Teams Enterprise separately
- Existing subscribers can continue using, renewing, upgrading, and adding users to their current Teams-included plans
- Customers can switch to the new licensing structure at contract renewal
4. Microsoft 365 Enterprise Plans
Enterprise plans offer enhanced compliance and security management compared to Business plans, along with additional business intelligence and analytics capabilities. These plans target enterprise customers and organizations with more than 300 users.
Microsoft 365 E3
| Item | Details |
|---|---|
| Price | $36.00/user/month |
| User Limit | Unlimited |
| Included Apps | Install on up to 5 PCs/Macs, 5 tablets, and 5 smartphones per user (Word, Excel, PowerPoint, OneNote, Microsoft Access – PC only) |
| Exchange Online (unlimited storage) | |
| Cloud Storage | Up to 5TB initial OneDrive storage per E3 user (1TB limit for subscriptions with fewer than 5 users) |
| Teams Included | Teams not included – separate purchase required* |
| Advanced Features | Power BI Pro, MyAnalytics |
Microsoft 365 E5
| Item | Details |
|---|---|
| Price | $57.00/user/month |
| User Limit | Unlimited |
| Included Apps | All E3 features |
| Advanced Security | Microsoft Defender for Office 365 Plan 2 with advanced threat protection and access control |
| Analytics Features | Power BI Pro, data analysis and visualization for informed decision-making |
| Voice Features | Phone System, Audio Conferencing |
| Compliance | Advanced compliance tools for risk assessment, data management, and regulatory requirements |
| Teams Included | Teams not included – separate purchase required* |
Microsoft 365 F3 (Frontline Workers)
| Item | Details |
|---|---|
| Price | $8.00/user/month |
| Target | Frontline workers, first-line employees |
| Included Apps | Web and mobile Microsoft 365 apps only |
| Cloud Storage | 2GB OneDrive storage per user |
| Limitations | Mobile Office limited to devices with built-in screens 10.9 inches diagonally or smaller |
Microsoft 365 Apps for Enterprise
| Item | Details |
|---|---|
| Price | $12.00/user/month |
| Included Apps | Desktop Office apps only |
| Teams Included | Teams not included – separate purchase required* |
5. Education and Specialty Plans
Microsoft 365 Education
| Plan | Price | Target | Features |
|---|---|---|---|
| A1 | Free | Students/Faculty | Web Office apps, Teams |
| A3 | $3.25/student/month<br>$4.50/faculty/month | Students/Faculty | Desktop apps included |
| A5 | $6.00/student/month<br>$8.00/faculty/month | Students/Faculty | All A3 features plus Power BI and Microsoft’s best-in-class intelligent security management, advanced compliance, and analytics |
Education License Requirements:
- Institution must enroll, not individual students
- Students can access Microsoft 365 for free using their school Outlook account if their institution has enrolled
Microsoft 365 Nonprofit
| Plan | Price | Features |
|---|---|---|
| Business Basic | Free | Web Office apps, Teams, Exchange Online |
| Business Standard | Discounted pricing | Desktop apps included |
| E3 | Discounted pricing | Enterprise features |
| E5 | Discounted pricing | Premium security and analytics |
Nonprofit Qualification Requirements:
- Must be a recognized charitable or nonprofit organization
- Must pass Microsoft’s nonprofit verification process
Microsoft 365 Government
Microsoft 365 Government is a specialized version for U.S. government agencies and contractors, meeting high-level security and compliance requirements.
| Plan | Target | Features |
|---|---|---|
| GCC | General government agencies | Government cloud environment |
| GCC High | DoD and high-security agencies | Enhanced security level |
| DoD | Department of Defense | Highest security level |
6. Add-on Licenses
Microsoft 365 Copilot
| Plan | Price | Requirements | Features |
|---|---|---|---|
| Microsoft 365 Copilot | $30/user/month | Requires Enterprise or Business eligible plan | AI-powered productivity tools |
| Copilot Pro | $20/user/month | For individual users | Personal AI features |
Microsoft Teams Related Licenses
| License | Price | Features |
|---|---|---|
| Teams Enterprise | Separate purchase under new licensing structure | Effective April 1, 2024 |
| Teams Premium | Add-on license | Advanced meetings, webinars, security features |
| Teams Essentials | Up to 300 users | Standalone Teams solution |
Project & Visio Licenses
| Product | Plan | Price | Features |
|---|---|---|---|
| Project | Plan 1 | $10/user/month | Web-based Project |
| Plan 3 | $30/user/month | Desktop + Web | |
| Plan 5 | $55/user/month | Premium features | |
| Visio | Plan 1 | $5/user/month | Web-based Visio |
| Plan 2 | $15/user/month | Desktop + Web |
Power Platform Licenses
| Product | Plan | Monthly Price | Features |
|---|---|---|---|
| Power BI | Pro | $10/user | Business intelligence |
| Premium | $20/user | Advanced analytics | |
| Power Apps | Per User | $20/user | App development platform |
| Power Automate | Per User | $15/user | Workflow automation |
7. Licensing Policies and Important Considerations
Internet Connection Requirements
Microsoft 365 requires regular internet connection to maintain the latest version and receive automatic upgrade benefits. If not connected to the internet for more than 31 days, apps enter reduced functionality mode where you can view and print documents but cannot edit or create new ones.
Device Installation Limits
- Personal: Up to 5 devices per user simultaneously
- Business/Enterprise: Up to 5 PCs/Macs, 5 tablets, 5 mobile devices per user
Data Retention Policy
When a license is removed from a user, Exchange Online data associated with that account is retained for 30 days. After the 30-day grace period, data is deleted and cannot be recovered. However, content linked to retention policies and matching retention labels is preserved for search purposes.
Business Plan User Limitations
Organizations with more than 300 users should consider Enterprise Microsoft 365 plans. Microsoft reserves the right to apply a tenant limit of 300 provisioned licenses across the Business plan suite.
Plan Changes and Upgrades
You can switch accounts to different plans. For example, you can upgrade from Office 365 E3 to Office 365 E5. In most cases, you can upgrade plans using the plan switching wizard in the admin center.
Subscription Cancellation Policy
| Subscription Type | Cancellation Policy |
|---|---|
| Monthly Commitment | Cancel anytime, no penalties |
| Annual Commitment (Monthly Payment) | Early cancellation may incur penalties |
| Annual Commitment (Annual Payment) | No refund if cancelled before contract end |
Volume Licensing
Applies to: Typically organizations purchasing 250+ licenses
Management Systems:
- Microsoft 365 Admin Center: Primary volume license management
- Microsoft Business Center: MPSA (Microsoft Product Services Agreement) license management
Benefits:
- Discounted pricing
- Centralized license management
- FastTrack support (150+ users)
License Movement and Reassignment
License Reassignment:
- Licenses can be moved between users
- Managed through Microsoft 365 Admin Center
- Group-based licensing supported
Important Limitations:
- When licenses are removed, eDiscovery tools can no longer search user mailboxes
- OneDrive for Business files are not deleted unless users are deleted from Microsoft 365 Admin Center or removed through Active Directory sync
Microsoft 365 Copilot Usage Limits
Personal Plans:
- Personal/Family: 60 monthly credits limit
- AI features available only to subscription owner, not shareable
Business Plans:
- Copilot Chat available to all Microsoft Entra ID users with Microsoft 365 subscriptions at no additional cost
- Full Copilot features require separate license
Subscription Term Limits
- Personal subscriptions: Up to 5 years possible
- Business subscriptions: Annual commitment default, monthly commitment option available
- If you register a different edition before your current Microsoft 365 period ends, it changes to the newly registered edition
8. Condition-Based Microsoft 365 Selection Guide
Personal User Selection Criteria
Microsoft 365 Basic Recommended for:
- Users who only need cloud storage
- Users satisfied with web-based Office apps
- Those seeking minimum cost Microsoft services
Microsoft 365 Personal Recommended for:
- Solo users needing desktop apps
- Users wanting to try AI features (Copilot)
- Those requiring 1TB cloud storage
- Users satisfied with 60 monthly AI credits
Microsoft 365 Family Recommended for:
- Households with 2+ family members
- Those needing 6TB cloud storage
- Cost-conscious multi-user households
- Cases where only subscription owner needs AI features
Business User Selection Criteria
Business Basic Recommended for:
- Small organizations satisfied with web apps
- Cases needing only email and basic collaboration tools
- Startups minimizing costs
- Consider separate Teams purchase if needed
Business Standard Recommended for:
- SMBs requiring desktop apps
- Organizations needing professional email systems
- Companies satisfied with basic security levels
- Note: Post-April 2024 new subscribers need separate Teams purchase
Business Premium Recommended for:
- Companies requiring advanced security
- Organizations needing GDPR compliance
- Remote work environments requiring device management
- Companies needing Microsoft Intune and Azure Information Protection
Enterprise User Selection Criteria
E3 Recommended for:
- Large organizations with 300+ users
- Companies needing advanced analytics tools
- Organizations requiring unlimited email storage
- Businesses needing Power BI Pro
E5 Recommended for:
- Companies requiring highest-level security
- Organizations needing phone system integration
- Financial/healthcare sectors requiring advanced compliance
- Companies needing advanced threat protection
Teams Licensing Considerations (April 2024 Update)
Existing Subscribers:
- Can continue using current Teams-included plans
- Renewal, upgrade, and user additions all possible
- Consider switching to new structure at contract renewal
New Subscribers:
- Must purchase separate Teams Enterprise license if Teams needed
- Need cost-benefit analysis comparing with existing Teams-included plans
- Frontline Workers (F3) and Business plans offer choice between Teams-included/excluded versions
Add-on License Selection Guide
Microsoft 365 Copilot Recommended for:
- Companies needing AI-powered productivity improvements
- Organizations with Enterprise or Business Premium+ subscriptions
- Organizations expecting ROI from $30/user/month investment
Teams Premium Recommended for:
- Organizations needing advanced meeting features
- Companies frequently hosting webinars and town halls
- Cases requiring advanced security and management features
Project/Visio Recommended for:
- Organizations where project management is critical
- Companies needing diagram and process documentation
- Cases requiring professional visualization tools
9. Conclusion and M365 Recommendations
Selecting Microsoft 365 licenses shouldn’t be based solely on feature and price comparisons. You must comprehensively consider organizational size, security requirements, compliance needs, and collaboration patterns.
For Personal Users:
- Solo use: Microsoft 365 Personal ($69.99/year)
- Family use: Microsoft 365 Family ($99.99/year)
- Minimum cost: Microsoft 365 Basic ($23.88/year)
For Small-Medium Businesses:
- Basic features only: Business Basic ($6/month)
- Desktop apps needed: Business Standard ($12.50/month)
- Advanced security needed: Business Premium ($22/month)
- Note: Post-April 2024 new subscribers need separate Teams purchase
For Enterprises:
- Basic enterprise: E3 ($36/month)
- Highest security level: E5 ($57/month)
Major 2024 Changes
Teams Licensing Policy Changes:
- New subscribers must purchase Teams separately
- Existing subscribers can maintain current plans
- Review new structure at contract renewal recommended
AI Feature Integration:
- Personal/Family plans include basic Copilot features (60 monthly credits)
- Business plans require separate Copilot purchase ($30/user/month)
Price Increases:
- Personal: $59.99 → $69.99 (annual)
- Family: $79.99 → $99.99 (annual)
- Existing subscribers maintain current pricing
License Selection Considerations
- Current vs. Future Requirements: Consider future expansion plans
- Teams Necessity: Review separate purchase costs for new subscriptions
- AI Feature Utilization: Analyze Copilot necessity and cost-effectiveness
- Security Level: Industry regulations and data protection requirements
- User Growth: 300-user limit and enterprise transition timing
You can change plans anytime as business grows or requirements change, so start with the plan that best fits your current situation. With Teams licensing policy changes, accurately calculating total cost of ownership (TCO) is especially important for new subscriptions.
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