Paint fireplace white or the same color as the walls, remove bookcase that is on the right side of the fireplace. Get a corner TV console for the left side of the fireplace....maybe tv will partially cover the window, but that is okay. Get some pretty artwork for over the fireplace and take the colors from that for pillows for your couch and a rug if you want. An ottoman or upholstered bench in front of your couch to be used for extra seating when you have company.......should be on rollers, easy to maneuver. Where the shelf unit is now, get a tall green plant..nothing else. If room, I think your chair and a small table will be good by the stairs. At the bottom of the stairs you could put a decorative shelf or console with drawers under the window...facing up the stairs. with a small viney plant on it. Oh, yes, I would pull your couch back as far as you can...without interfering with the door. To bad the door does not open the other way. Have fun rearranging. I do approve of your curtains...white sheers but they should be twice as full as they are now and the door curtain should match.

re: a futon I think they can be iffy in terms of quality, or design. I've run into ones that aren't comfortable as a sofa (too low; too deep of a seat; something), and ones that are too hard for sleeping on. However, my dad has one that opens to a double bed, and it's actually OK for sleeping, and it's OK for sitting. So I would say don't get one unless you're going to be able to look around and find one that's well designed and comfortable, and spring for it. I know my mom looked long and hard for this one. It has drawers underneath, which is nice for storing the pillows, etc., when it's in bed form (which nowadays is never; we just leave it made up anymore, bcs the socializing is done in the living room, and the futon is in the den). But if he expects to have people sleep over, a futon is useful.

I'm thrown off because I can't figure out the coloring. Is that a brick wall or just wallpaper? And the wall behind the sofa...is that a dark blue or a dark gray? I don't think the brown sofa looks good against the current color on the wall. If that is indeed wallpaper & you want to keep it, I'd repaint ALL the other walls some shade of white or lighter gray, some color that you can pick up from the papered wall. Right now you have the brick wall, a dark wall, & the other walls still another color. Too much for a small room. Figure out how to take that weird cornice down. I'd remove that bookcase/divider completely. If you feel the need for a "divider", put up a whole new wall but I'd take that bookcase out. It's just a receptical for more clutter/family photos, etc & you already have that shelving unit doing the exact same thing. Use the sofa to divide the space between entry way & living room. If room permits, I'd take the sofa & place it so that the back is parallel to that white console you have by the entry. Position the love seat so the both seating units form an "L" shape. If the sofa is too long, then try the love seat parallel. Place a side table with a lamp between the 2 units. I really dislike "signs" in the house unless they happen to be real, vintage, etc. & connect to the surroundings. See if you can find something else to put behind that white console or buffet table. Not sure where to place the shelving unit yet but once you rearrange the seating, you will find a space. I think most furniture looks ridiculous when placed diagonally like the current shelves are...looks like it couldn't fit in flat against the wall so it was placed on an angle to make it fit. Once the furniture is rearranged, go for details...a rug, pillows, artwork. You may even have room for another small chair . If so, get something in a colorful print. No more brown. It can be difficult to design a room when you walk directly from the outside into your living room & no foyer as a buffer. There are plenty of articles on Houzz about arranging furniture for such a situation as yours. Peruse those & you'll get some amazing ideas. Be careful with hanging art. It shouldn't be hung randomly without regard to size, location, height, etc. You have several smaller pieces that just don't work well.

I would love a big family photo framed or TV above the fireplace. A three-seater white couch with multi-colored cushions. Two single-seaters in front of it a small. I found a few ideas similar to your room that may be helpful.