If you are portraying people in their habitat, you need to include the surroundings. How much depends of what you want to show. If you portrait a blacksmith you want his anvil and hammer, maybe the fire, but blur the rest of the room. If you show a rich person in the New York penthouse with Scandinavian designer furniture you want everything sharp , maybe even F22 with lots of fill flashes. If you want a traditional person portrait face or body you want as narrow a dof as you can get away with. Beware of a trap though! Shooting wide open often has a too narrow DOF. Hence my wording "get away with". Wide open tends to be so narrow that only the nose or eyes are in focus and the nose or eyes and ears are not. So you might need to stop down just a bit, which will include the entire face into the focus field and sharpen the lens up a bit as well. Sometimes you might want the dreamy look of the wide open , other times not so much. As ling as this is a conscious choice you make, it is good.
If you want to make your subject beautiful you can use this study as a guideline:
Especially study the example photos to evaluate what makes the difference.
So from it we can conclude that you should shoot with a interchangeable lens camera, narrow DOF, No flash, in the afternoon, sunset or early night.