This is what I have so far. Not enough seating!

Why not add another occasional chair to match the existing one, so that you have a pair, and pull the two occasional chairs forward in the room to form a conversation group with the sofa. Then add a rug to unify the whole group.

HI -- Congrats on your new home . This style of living area does limit furniture arrangement .Usually the large wall , which you have the fireplace and TV on is where the sofa would go . But now the sofa either has to sit where it is now or in front of the window or backed to the dining room /kitchen area. That was where you were standing when you took the photo, right ? But your sofa is a little big to cut across the room , so best place is either where it is now or in front of the window . Some have made that railing behind the sofa into a solid wall so you don't see the back of the sofa when entering . Maybe think about doing that if that's a concern for you . So I think the sofa is in the best place for you now . Do you have or can you make room on the side of the fireplace to mount the TV there with a console cabinet under . Then match with something similar on the other side . For the front window , could you fill that whole wall with drapes - full height and wall to wall . It will make the room look bigger and more modern. Maybe get two chairs that can sit in front of the window with a small side table between. Or back to the dining room . Then find an area carpet that is just a little smaller than the room. Then add an accent color with pillows an accessories . Then add some lamps ,-standing and table lamps with side tables . First thing to start with is an area carpet .

The chair and sofa are not a match made in heaven. I would get two larger fabric arm chairs and place them either in front of the window or facing the window. Small table in between. If you get chairs with not too high backs, you won't block much of the view/light or of the view through the room. You need something that can weigh up against the large leather couch and the TV unit.
Get a rubber brush and you can brush the dog's hairs easily off fabric.

something like this could be good:

As the drapes appear to be in the blue range I would look for a pair of club chairs that will compliment both blue&brown. Add a low pile area rug also with a blue&brown scheme or a sisal rug banded in brown. I would pull the leather sofa forward and then place club chairs directly opposite. So the furniture is floating in the space which will visually make small space area larger.

Thank you! I am feeling very overwhelmed with all of this! Yes, I was standing in the dining area upon taking this. I feel like the couch is in the best spot because it is so large. I agree about the chair that I currently have in the room now. I think that it would be best to purchase two of the same - thinking about putting it on either side of the fireplace? If i place them in front of the window I feel like it would make the room even smaller and crowded. Love the idea about the drapes! As far as the rug goes, do you think it should take up the majority of the room? Or just the area in between the furniture?
Thank you for the rubber brush suggestion!!!!

I would suggest an 8x10 rug which could be centered in the space.

Believe me, I know about dog hairs. Three black labrador retrievers and a beige fabric sofa :-) You'll love the rubber brush.
Definitely a large rug. Your sofa's front legs should be on it and if you get two chairs, their front legs on it as well. It will tie the room together.

Nice ideabook about rugs, follow the link under the picture:
https://www.houzz.com/magazine/11-area-rug-rules-and-how-to-break-them-stsetivw-vs~222609

Great link for the rug! Thank you :)
For the chairs, should the height be bigger then what I have now?

chairs are there just as an example for shape and colour:
http://www.homedecorators.com/P/Curve_Area_Rug/310/

http://www.pier1.com/Cool-Velvet-Stripe-Pillow/2607494,default,pd.html?cgid=pillows

Just a bit taller back for the chairs would be nice. As long as they have armrests and are larger than the chair you have now... ánd are comfortable to sit in...

The couch is very bulky so I suggest chairs with finer lines. Two (you could mix and match) with a side table in between. You could put this type of chair with a lower back angled next to the fireplace (near the window).

Ideas for side tables.....

The ottoman is too small - choose a bigger coffee table and a rug with light neutrals.

Love Lydia's middle chair ^ example which would bring in the existing blue&brown colors. Also perfect side tables ^ too for a smaller sized room. I would consider using two for a different option than a coffee table to bring more flow.

If you could add a sheer with the curtains it would make the window seem less overwhelming and give some privacy. These are blue (and white) like your curtains.

OMG! Why is there not a LOVE button? Carloins the rug is AMAZING! and Lydia the chairs and side tables look perfect! Where did you find those links?!

I search on Google. Here are the links. These are pricey.....sorry I only look at the style when I do a search. You can probably find the same styles in local stores.

http://www.zincdoor.com/p/Sliced-Petrified-Wood-Accent-Table-Large__PAL611279.aspx?SSAID=256758
http://www.tonichome.com/catalog.php?item=1591&catid=1&ret=catalog.php%3Fpage%3D3%26category%3D1
http://www.belfortfurniture.com/Item.aspx?ItemID=915434530&ItemNum=K741-000
http://www.jacksonvillefurnituremart.com/Item.aspx?ItemID=-1334129402&ItemNum=IMAR-05
http://bonbon-maison.com/531433/home/
http://www.amazon.com/Marilyn-Mirrored-Round-Accent-Table/dp/B00B9WKAO4