Fix “Your organization’s policies don’t allow you to share with these users. Go to External Sharing in the Office 365 admin center to enable it” Error in SharePoint Online

Problem: When trying to share a document with an external user, received the error message: “Your organization’s policies don’t allow you to share with these users. Go to External Sharing in the Office 365 admin center to enable it.”

Root cause:

External Sharing is disabled either at tenant level or site collection level!

Solution:

Enable External Sharing for SharePoint Online at tenant level and site collection level. Follow these steps to enable external users to share in SharePoint Online tenant.

• Login to Office 365 Admin Center >> SharePoint admin center 
• Expand “Policies” >> Click on “Sharing” from left navigation >> Set the “External sharing” settings for SharePoint to anything other than “Only people in your organization”.
  

  

• In the classic admin center, You can directly click on sharing and then Set “Sharing outside your organization” to either “Allow users to invite and share with authenticated external users” or “Allow sharing to authenticated external users and using anonymous access links”
• Click “OK” to save your changes.
  

  

External Sharing is already enabled, Still getting this error message?

Well, this could be because: At the time of creating the site collection, External Sharing may have been disabled in SharePoint Online Admin Center and the site collection inherited that configuration. So, to fix the problem, You have to enable external sharing at the site collection level too.

How to Enable External Sharing at Site Collection Level?

You can enable external sharing at the site collection level using the new SharePoint Online admin center!

• Go to SharePoint Online Admin Center >> Select the desired Site collection from the list
• Click on the “Sharing” button >> Set the sharing settings appropriately, such as “New and existing external users”. Click on “Save” to commit your changes.

  

Get External Sharing Settings of a SharePoint Online Site Collection:

You can also use this PowerShell script in SharePoint Online Management Shell to check if external sharing of a SharePoint Online site collection is disabled.

#Set Admin Center URL
$AdminCenterURL = "https://crescent-admin.sharepoint.com/"
$SiteURL="https://crescent.sharepoint.com/sites/operations"

#Connect to SharePoint Online
Connect-SPOService -url $AdminCenterURL -Credential (Get-Credential)

#Get the external sharing settings
Get-SPOSite $SiteURL | Select -ExpandProperty SharingCapability

SharePoint Online: Enable External Sharing for a Site Collection using PowerShell

To turn on external sharing for a site, use this PowerShell:

#Set Admin Center URL
$AdminCenterURL = "https://crescent-admin.sharepoint.com/"
$SiteURL="https://crescent.sharepoint.com/sites/operations"

#Connect to SharePoint Online
Connect-SPOService -url $AdminCenterURL -Credential (Get-Credential)

#Set the external sharing settings
Set-SPOSite $SiteURL -SharingCapability "ExternalUserSharingOnly" 

Done! That’s all. Now you should be able to share from the SharePoint Online site with external (guest) users.