“will all the users on this family plan end up sharing docs?”
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No, (or yes). You create a master account, if you install this on multiple computers under this master account, then yes. If you invite another email address to your plan, you can install each "invited email address" on more than 1 machine. All documents will be shared between single email addresses. So if there is one master account and 3 invited email addresses. The master will share between all the installs from the master (and no others). Each separate email address will share with that one email address.
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