It is designed so that everyone gets to keep their own iCloud Music Library and playlists, when you share the Family subscription.
First set up Family Sharing. This defines the sharing group. One person in the group is the formal Organizer. The organizer adds Apple IDs to the group, which sends out invitations.
The organizer gets the Apple Music Family subscription. The existing subscriptions of the other group members will expire automatically (at the end of their current period). The other group members do not subscribe to the family subscription, but get access to the service by being part of the group.
Family Sharing - Apple Support
Set up Family Sharing - Apple Support
Get an Apple Music Family subscription - Apple Support