There certainly can be a lot of confusion when you see the “Looks like this isn’t a Microsoft account. Try another e-mail or sign up for a new one” as shown in screenshot below:
Put simply, Microsoft Office 365 accounts from your company or school are not considered Microsoft accounts because they are owned and managed by an institution. As such you can not use corporate Microsoft 365 email to add user to computer.
So to get around this there are two ready solutions:
- use a personal Microsoft email account from Outlook.com or Hotmail.com
- create a local account on the computer, that is not tied to any email address
Once the user is signed in, they can then download any of the Microsoft Office 365 applications (like Word and Outlook) and they can set up they’re OneDrive pointing to they’re Microsoft Office 365 corporate e-mail account.
This does seem needlessly complex on the surface but it is done intentionally because neither Microsoft nor the user in question have control over the corporate email address. If an administrator from the company decided to change or delete the corporate e-mail address that was in use the whole machine could be locked out and that is not something Microsoft wants to deal with.