A 12 x 12 room is a compact size for a living room. Even so, there are things you can do to make use of every square inch of space and to make the room feel larger. It all boils down to adequate planning and to your ability to edit what goes into the room. The goal of any good design plan is to make sure that everyone who walks into the space feels comfortable.
Use a light-reflecting color on the walls. Dark paint absorbs light, making a space feel smaller. A light shade of paint actually reflects light, giving a room a more spacious feel. Any light-reflecting shade will do -- icy blue, pale green or yellow, creamy white, tan, light coffee or violet.
Introduce a theme. In the case of a small living room, this means finding a common decorating thread that ties the entire space together. This may be a pattern or specific decorating style that makes the space feel cohesive. For example, you don't want a rustic sofa in the same room as a modern entertainment unit. In a small space, in particular, more than one style is visually confusing and makes the room feel cluttered. Get creative. If you need a television stand that matches that rustic couch, look at the chest of drawers in your bedroom. If it's rustic like the sofa, consider bringing it into the space and removing the modern piece.
Use the smallest pieces of furniture you can realistically get by with. Scale is important when it comes to making the most of a small room. An apartment-sized sofa or loveseat will make the room feel more spacious than a large, heavy sofa. It can be tempting to bring in the very same furniture you've been moving from place to place, even if it no longer fits the space. Determine which of those pieces actually fit and edit those out that no longer do. The adage "less is more" absolutely applies to decorating a small room.
Arrange furniture so that there's an easy flow of traffic. If it's difficult to walk from one side of the room to the other because an ottoman or other piece of furniture is in the way, you have too many things in the space. It should be easy for you and guests to move freely around the room.
Find double-duty purposes for things you bring in. A small bookshelf can double as a sofa table, a small trunk can act as an end table and extra storage space and a low-profile shoe organizer can hold pet or baby toys and slip under the sofa when not in use. Ask yourself if you can use an item in more than one way before you introduce it into the room.