Don't swap out what you have yet - keep the couch and rethink the layout first. Most people put everything perpendicular to the TV, which eats up floor space fast. Try angling your couch at maybe 45 degrees instead, with the coffee table floating in front of it rather than pushed against anything. The TV stand can stay where it needs to be, but this diagonal setup tricks your eye into seeing the room as wider because your sightlines aren't running straight down the walls.
Here's the thing nobody mentions: vertical space is your real estate in a small place. Don't put a tall shelf or cabinet next to your couch at eye level - it makes the walls feel like they're closing in. Keep that area open and put taller stuff (like a bookcase or lamp) in a corner instead, maybe behind or to the side of where you sit. This way your eyes have somewhere to travel upward instead of feeling boxed in by furniture at arm's reach. You'd be surprised how much bigger 12x14 feels when the walls aren't lined with stuff at shoulder height.
Only go sectional if you actually need more seating or storage. Most of the time a cramped feeling comes down to arrangement and sightlines, not the pieces themselves.