First, you should pick an interior design theme which appeals to you but which will also add appeal to a tiny space. Having a good amount of clutter in the living room will make the place feel smaller so avoid decorating themes that clutter up the room.
The important thing to remember in furnishing smaller living areas is produce an area that is cozy and beautiful and yet easily doubles as a very functional part of the house which can serve a multi-purpose role. Cluttering the living room is a bad idea so you need to be clever about your furniture choice and go only for those that serve at least a dual purpose. Sofa beds, futon sets, sectional couches come in mind when you want such furniture.
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Consider the decor. Before deciding on what furniture to buy you need to decide on the decor and theme of your living room space. You may like traditional furnishings or antique furniture. Or perhaps you like the edgy contemporary look. Either way, decide on what style you like best before shopping.
Color. The color scheme will be according to the furniture that you have selected. You can either have the same color but with different tone or you can have the contrasting color. Like in contemporary living room it is the contrast that rules the entire decor. On the other hand, in traditional style select the color as per the furniture color which is generally brown, beige and cream. Pick the wall color or color of wall paper according to the color of furniture, flooring and upholstery. Read living room decor ideas to know more.
The best sofas for small rooms are sectional sofas. Sectional sofas are good because they can be split in to many sections. You can place the sections in different positions in your room. If you like corner sofas, then sectional sofas will work for you, since they can also be arranged in an L shape. If you think that what is on the market is still not suitable for you, then talk to the manufactures. They can customize one just for your needs.