Will a friend get story credit if..

they enter with me into an instance that is beyond the step they are on? Example: I am about to do the last step of Episode 2 of Living Story 4. My friend hasn't even done the first part of Episode 1 of LS4, never mind any part of Episode 2. She does have the entire LS4 package unlocked (all 4 episodes) but has never played it.

Can parts of the story be done ad hoc by just joining someone or do they have to be done in order?

Has to be done in order if I recall correctly.

They have to be on the same step as you or it wont count.

To be more clear, you can do individual chapters out of order and get credit, but you can't do steps in a chapter out of order. Like you an complete chapter 2 before you complete chapter 1 but you have to do all of chapter 2 in order. So if you were starting a chapter with someone, and they hadn't done previous chapters, they could join you.

Thanks to all for the answers. We'll start LS4 Episode 3 as a team.

There's a degree of confused use of terms in the Personal Story journal, but the bottom line is as above - no, they won't get credit. You can play Seasons and Episodes within Seasons out of order, but you have to work through the individual steps within each Episode in sequence to get credit for them.

Practical tips, though - and this is important -

1. make sure that anyone who hopes to get story credit, or achievements, actually has the right step set active in their Story Journal, and
2. make sure that they're at the same point in the step, if there's anything that has to be done in Open World (such as talking to some NPC or another).

The game won't credit them with the step if they're not set up correctly - even if they've actually done everything that precedes it. Nor will it stop them taking part, or warn them when they enter. And you'd be surprised how often my group gets to the end of a step, only to have someone admit that they didn't get credit, even after all this time.