Licenses and the Microsoft 365 Admin Center

What it is

In Microsoft 365, a user can only use a service if the user has a license for it. The license is the switch that turns features on. The Microsoft 365 admin center is the main place where an administrator creates users, assigns licenses and sets up the organization, including its domain names.

How it works

What a license contains

A license is a bundle of service plans. A Microsoft 365 E3 or Business Premium license, for example, includes plans for Exchange Online, SharePoint, Teams and more. Add-on licenses, such as Microsoft 365 Copilot, are bought separately and assigned in the same way on top of a base license.

An administrator can turn individual apps and services in a license on or off for a user. If a service plan is off, the user does not see that feature, even though the license is assigned.

Assigning licenses to users

To assign a license to one user, go to Microsoft 365 admin center > Users > Active users, select the user, then choose Licenses and apps. You can also manage licenses from the Billing > Licenses page, which shows how many licenses you own and how many are assigned.

Each user needs a usage location before a license can be assigned, because the available services depend on the country or region.

Assigning licenses to groups

Group based licensing assigns a license to a group, and every member of the group receives it. When someone joins the group they get the license, and when they leave they lose it. It is managed through Microsoft Entra ID and needs a Microsoft Entra ID P1 license for the people who benefit from it, which is included in plans such as Microsoft 365 E3, E5 and Business Premium.

Combined with a dynamic group, for example all users whose department is Sales, licensing becomes automatic. This avoids assigning licenses user by user.

Domain names

Every tenant starts with an initial domain that ends in onmicrosoft.com. Most organizations add their own domain, such as contoso.com, so that users sign in and receive mail with it.

Go to Microsoft 365 admin center > Settings > Domains to add a domain. To prove you own it, Microsoft asks you to add a TXT record (or an MX record) to the domain's DNS. After verification you add the DNS records for services, such as the MX record that routes email to Exchange Online, and you can set one domain as the default for new users.

Organization settings

Go to Microsoft 365 admin center > Settings > Org settings to find settings that apply to the whole organization. They are grouped in tabs.

• Services holds settings for individual services, such as Microsoft 365 on the web, Microsoft Teams or Copilot.
• Security and privacy holds settings such as password expiration policy and sharing.
• Organization profile holds the organization's name, contact details, release preferences and help desk information.

A worked example

Contoso hires 40 sales staff. The administrator creates a dynamic group Sales that contains everyone whose department is Sales, and assigns a Microsoft 365 E3 license to the group. Each new hire is licensed the moment their department is set. A few months later Contoso adds contoso.com as a domain, verifies it with a TXT record and sets it as default, so new mailboxes use the company name.

How the exam asks about this

• "A user signs in but cannot open Outlook. What is the likely cause?" The user has no license that includes Exchange Online, or the Exchange service is turned off in the license.
• "How can all members of a department get the same license automatically?" Assign the license to a group, using group based licensing, ideally a dynamic group.
• "Where do you add and verify the company's own domain name?" Microsoft 365 admin center > Settings > Domains.