Microsoft 365 License Rules: Devices, Shared Mailboxes, Who Needs One
At renewal every 10-to-200-person firm asks the same question: who actually needs a license, and what do the shared mailboxes, meeting rooms, copiers, contractors and part-timers cost? Microsoft's rules are shorter than people fear. This guide states them from Microsoft's own documentation, with October 2026 list prices, and works a 60-person firm to an annual total.
The rules on one table
Prices are per user per month on an annual term, Commercial segment (Microsoft list price, October 2026 price list). The list carries annual figures: Microsoft 365 Business Premium is $264.00 per user per year, and $264.00 ÷ 12 = $22.00.
| Who or what | Needs a license? | Which one | Price |
|---|---|---|---|
| A person with a PC or Mac | Yes, one per person; it covers five PCs or Macs, five tablets and five phones | Business Basic, Business Standard, Business Premium, E3 | $7.00, $14.00, $22.00, $39.00 |
| A person who works from a phone or shared tablet | Yes, if the role fits Microsoft's frontline definition | Microsoft 365 F1, Microsoft 365 F3 | $3.00, $10.00 |
| Shared mailbox up to 50 GB | No | None | $0.00 |
| Shared mailbox over 50 GB, or with an archive or litigation hold | Yes | Exchange Online (Plan 2), or Plan 1 plus Archiving | $8.00, or $4.00 + $3.00 |
| Room or equipment mailbox | No, unless over 50 GB | None | $0.00 |
| Guest from another organization | No | None | $0.00 |
| Contractor with an address in your domain | Yes | Exchange Online Kiosk or Business Basic | $2.00 or $7.00 |
| Admin-only account with no mailbox | No | None | $0.00 |
| Former employee | No, after the handover | License removed; mailbox kept 30 days, or converted to shared | $0.00 |
One user license, fifteen devices
Microsoft's subscription documentation states that when a plan includes Microsoft 365 Apps, each person can install the apps on up to five PCs or Macs, five tablets and five phones (Microsoft Learn, Understand subscriptions and licenses in Microsoft 365 for business, ms.date 13 July 2025). The license follows the person, not the machine.
The plans that carry the desktop apps are Microsoft 365 Apps for business ($10.00), Business Standard ($14.00), Business Premium ($22.00), Microsoft 365 E3 ($39.00) and E5 ($60.00). Business Basic ($7.00), Office 365 E1 ($10.00) and the F plans give the web and mobile apps only. Microsoft's licensing overview for Microsoft 365 Apps adds a housekeeping rule: when a user signs in on more than ten devices, the one unused for the longest time is deactivated automatically (Microsoft Learn, Overview of licensing and activation in Microsoft 365 Apps, checked October 2026).
Shared mailboxes: no license under 50 GB, and the four things that trigger one
Microsoft's shared mailbox page is explicit (Microsoft Learn, About shared mailboxes in Microsoft 365, ms.date 13 March 2026): a shared mailbox can store up to 50 GB of data without a license. Four situations need one:
- Over 50 GB. Assign Exchange Online (Plan 2) at $8.00 to lift the limit to 100 GB.
- An archive mailbox. Plan 2, or Plan 1 ($4.00) with the Exchange Online Archiving add-on ($3.00).
- Litigation hold. The same two options as the archive.
- Premium features such as Defender for Office 365 or eDiscovery (Premium) on that mailbox.
Three operating rules come with it: a shared mailbox supports a maximum of 25 users, above which Microsoft says to use a Microsoft 365 group; sign-in for its own account stays blocked; and everyone who opens it must have a licensed Exchange Online mailbox of their own.
Converting a leaver's mailbox to a shared mailbox requires it to hold a license at the moment of conversion; afterwards the license can be removed if the mailbox is under 50 GB, and the account must stay as the anchor (Microsoft Learn, Convert a user mailbox to a shared mailbox, ms.date 2 February 2026). Our Exchange Online plan comparison covers the mailbox sizes.
Room mailboxes, copiers, service accounts and admin accounts
Room and equipment mailboxes. Microsoft's licensing page says you do not need to assign licenses to resource mailboxes, room mailboxes and shared mailboxes except when they exceed the 50 GB quota (Microsoft Learn, Understand subscriptions and licenses, ms.date 13 July 2025). Create them under Resources in the admin center and block sign-in on their accounts (Microsoft Learn, Create room and equipment mailboxes, ms.date 8 April 2026). A conference room with a Teams Rooms system is different: the device needs its own Teams Rooms Pro license at $40.00 per room per month.
Copiers and applications that send mail. If the device signs in to a mailbox to send, that mailbox needs a license, and Exchange Online Kiosk at $2.00 is the smallest. If it relays through a connector from your fixed IP address, or only delivers to your own users, no mailbox is involved and no license is needed.
Service accounts and admin accounts. An account exists in Entra ID at no charge and needs a license only when it uses a licensed service: a mailbox, OneDrive, Teams. A dedicated Global Administrator account that holds a role and nothing else needs no license; keep it separate from the person's daily account, with phishing-resistant MFA. An integration account that reads a mailbox needs the mailbox license; an app registration using application permissions needs none.
Guests and contractors
A guest, invited through Microsoft Entra B2B, needs no Microsoft 365 license to open the files, sites and teams you share. Entra External ID bills by monthly active users above 50,000 a month, and only when the tenant is linked to an Azure subscription; our guest and external users guide has the detail.
The line is the mailbox. A contractor who works from their own company's email and needs your SharePoint site or Teams channel is a guest at $0.00. A contractor who needs an address in your domain needs a license: Exchange Online Kiosk at $2.00 for web and mobile mail only, Business Basic at $7.00 for mail plus Teams and the web apps, Business Standard at $14.00 for the desktop apps. Buy it for the engagement, remove it the day the engagement ends, and reassign it to the next contractor.
Frontline F1 and F3, Exchange Online Kiosk, and the 300-seat cap
Microsoft splits a workforce into information workers, who have a desktop or laptop, and frontline workers, who work on tablets or phones directly with customers, on a floor or in a warehouse, and says you may mix license types for the two groups (Microsoft Learn, Understand frontline worker user types and licensing, ms.date 6 October 2025). The F plans are for the second group only.
| F1 | F3 | Office 365 F3 | Exchange Online Kiosk | |
|---|---|---|---|---|
| Price | $3.00 | $10.00 | $4.00 | $2.00 |
| Mailbox | None | Kiosk, 2 GB | Kiosk, 2 GB | 2 GB |
| Office apps | View in Teams and SharePoint | Web and mobile | Web and mobile | None |
| Teams, Shifts, SharePoint, OneDrive | Yes | Yes | Yes | No |
| Power Apps and Power Automate | No | Yes | Yes | No |
| Intune and Entra ID P1 | Yes | Yes | No | No |
Microsoft's frontline setup guide states that users must have an F3 license to get access to email, and that email and the Power Platform are only included with F3 (Microsoft Learn, Set up Microsoft 365 for frontline workers, ms.date 24 December 2024). F1 is for people who chat, check shifts and read documents; F3 adds the address; Kiosk alone is the $2.00 answer for someone who only reads and replies to mail on the web. Our F1 vs F3 vs Business Basic article works through the edge cases.
The Business plans are designed for organizations with up to 300 users, counted across the Business family combined; our 300-license limit article covers what Microsoft's documents say and what the commerce systems enforce. F1 and F3 are not Business-family plans, so a distributor with 120 office staff and 400 warehouse staff fits on Business Premium plus F3; above 300 information workers the move is to Microsoft 365 E3 at $39.00.
When a person leaves
Microsoft's offboarding guidance sets the timing (Microsoft Learn, Remove a former employee, ms.date 5 January 2026): when you remove or delete a license, the former employee's email, contacts and calendar are retained for 30 days and then deleted permanently; if you delete the account, OneDrive and Outlook content is retained for 30 days, during which the account can be restored. The order of work that keeps the data and frees the seat:
- Block sign-in and reset the password on the day of departure.
- Decide the mailbox's future: convert it to a shared mailbox while it still holds a license, then remove the license; or place it on litigation hold with Plan 2 if a matter is open; or give a manager access for 30 days and let it go.
- Transfer OneDrive ownership to the manager before deleting the account.
- Remove the license and reassign it; under an annual term the seat stays paid until renewal.
- Delete the account after the 30 days if nothing else depends on it.
Rehires are their own case, covered in rehiring a former employee.
A 60-person firm, worked at list prices
A regional services firm: 40 office staff, 12 warehouse and field staff with company phones, 8 part-time seasonal staff, the usual mailboxes and devices. Annual term, Commercial, Microsoft list price, October 2026 price list.
| Item | Count | License | Per year each | Per year |
|---|---|---|---|---|
| Office staff | 40 | Microsoft 365 Business Premium | $264.00 | $10,560.00 |
| Warehouse and field staff with phones | 12 | Microsoft 365 F3 | $120.00 | $1,440.00 |
| Seasonal staff, Teams and Shifts only | 8 | Microsoft 365 F1 | $36.00 | $288.00 |
| Shared mailboxes (info@, sales@, ap@, hr@, support@, jobs@) | 6 | None, under 50 GB | $0.00 | $0.00 |
| Room and equipment mailboxes | 4 | None | $0.00 | $0.00 |
| Former CFO mailbox kept on hold as shared | 1 | Exchange Online (Plan 2) | $96.00 | $96.00 |
| Outside accountant and two client PMs | 3 | Guests | $0.00 | $0.00 |
| Contractor with a company address | 1 | Exchange Online Kiosk | $24.00 | $24.00 |
| Copier that signs in to send scans | 1 | Exchange Online Kiosk | $24.00 | $24.00 |
| Admin-only accounts | 2 | None | $0.00 | $0.00 |
| Total | $12,432.00 |
That is $1,036.00 a month for 60 people, with 40 Business-family seats well under the 300 cap. The two lines firms this size most often get wrong are the 12 F3 seats, often bought as Business Basic at $84.00 a year each, and the six shared mailboxes, which sometimes still carry a Business Basic license from the day they were converted. The Microsoft 365 Plan Optimizer prices alternative mixes; the license audit guide explains how to find the leftovers.
Frequently asked questions
How much does a Microsoft 365 F3 license cost?
$10.00 per user per month on an annual term, from $120.00 per user per year, Commercial segment (Microsoft list price, October 2026 price list). It includes a 2 GB Kiosk mailbox, the web and mobile Office apps, Teams, Intune and Entra ID P1, for users who fit Microsoft's frontline definition.
How much does a Microsoft 365 F1 license cost?
$3.00 per user per month on an annual term, from $36.00 per user per year. F1 has Teams, Shifts, SharePoint and OneDrive but no mailbox and no Office editing; Microsoft's frontline documentation states that email requires F3.
What is Exchange Online Kiosk and who should use it?
Exchange Online Kiosk is a 2 GB mailbox with Outlook on the web and mobile access for $2.00 per user per month. It fits staff who read and reply to a few messages, contractors who need an address in your domain, and devices that sign in to send mail.
Do shared mailboxes need a license in Microsoft 365?
Not up to 50 GB. Over 50 GB, or for an archive or a litigation hold, the shared mailbox needs Exchange Online (Plan 2) at $8.00, or Plan 1 at $4.00 plus the Archiving add-on at $3.00. The people who open it need their own licensed mailboxes.
How many devices can one Microsoft 365 license be installed on?
Five PCs or Macs, five tablets and five phones per licensed user, on the plans that include Microsoft 365 Apps. Past ten signed-in devices, the one unused for the longest time is deactivated automatically.
What happens to a user's email when I remove their license?
Microsoft retains the mailbox for 30 days after the license is removed and then deletes it permanently. Convert the mailbox to a shared mailbox before removing the license if you need to keep it, or place it on hold with a Plan 2 license.
Sources
- Understand subscriptions and licenses in Microsoft 365 for business — Microsoft Learn, ms.date 2025-07-13, read from the public MicrosoftDocs source on GitHub, checked 2026-10-11
- About shared mailboxes in Microsoft 365 — Microsoft Learn, ms.date 2026-03-13, checked 2026-10-11
- Convert a user mailbox to a shared mailbox — Microsoft Learn, ms.date 2026-02-02, checked 2026-10-11
- Create room and equipment mailboxes in Microsoft 365 — Microsoft Learn, ms.date 2026-04-08, checked 2026-10-11
- Remove a former employee - Overview — Microsoft Learn, ms.date 2026-01-05, checked 2026-10-11
- Understand frontline worker user types and licensing — Microsoft Learn, ms.date 2025-10-06, checked 2026-10-11
- Set up Microsoft 365 for frontline workers — Microsoft Learn, ms.date 2024-12-24, checked 2026-10-11
- Overview of licensing and activation in Microsoft 365 Apps — Microsoft Learn, checked 2026-10-11
- Microsoft US Commercial price list, October 2026: Microsoft 365 Business Basic, Business Standard, Business Premium, Apps for business, E3, E5, F1, F3, Office 365 E1 and F3, Exchange Online Kiosk, Plan 1, Plan 2, Exchange Online Archiving, Microsoft Teams Rooms Pro
Key takeaways
- One user license covers five PCs or Macs, five tablets and five phones; it follows the person, not the machine.
- Shared, room and equipment mailboxes need no license up to 50 GB; an archive, a hold or more space needs Exchange Online Plan 2 at $8.00 or Plan 1 plus Archiving at $7.00.
- Guests need nothing; a contractor with an address in your domain needs Kiosk at $2.00 or Business Basic at $7.00.
- F1 at $3.00 and F3 at $10.00 are for frontline roles only, and F1 has no mailbox; F seats sit outside the 300-seat Business cap.
- A removed license leaves the mailbox for 30 days; convert it to shared while it is still licensed if you want to keep it.
- A 60-person firm with 40 Business Premium, 12 F3, 8 F1 seats and the usual mailboxes comes to $12,432.00 a year at Microsoft list price, October 2026 price list.
If your renewal is near and the seat count has drifted from the headcount, the Microsoft 365 License Audit and Optimization service at $1,950.00 per project, quoted in writing before work begins, applies these rules to every account in your tenant and hands you the corrected order.
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