You should use the CREATE ENCRYPTED DATABASE statement when you have an existing database that you want to encrypt. Use CREATE ENCRYPTED FILE statement only in the case where you have a database you want to encrypt that requires recovery.
You cannot be connected to the database you are encrypting when you execute the statement.
The CREATE ENCRYPTED FILE and CREATE ENCRYPTED DATABASE statements differ from each other as follows:
The CREATE ENCRYPTED FILE statement must be executed against each of the database-related files independently (transaction log, transaction log mirror, dbspaces, if any), whereas the CREATE ENCRYPTED DATABASE statement automatically encrypts all the database-related files.
The CREATE ENCRYPTED DATABASE statement cannot be used on a database requiring recovery; the CREATE ENCRYPTED FILE statement can.
The CREATE ENCRYPTED DATABASE statement cannot be used inside procedures, triggers, or batches. The CREATE ENCRYPTED FILE statement can.
The CREATE ENCRYPTED DATABASE statement supports the SIMPLE encryption algorithm, but the CREATE ENCRYPTED FILE statement does not.