We'd like to tell you that the primary consideration for placement of your storage or tool shed should be aesthetic and practical concerns such as sunlight, exposure to weather, and slope of the ground. Unfortunately, the answer is actually best answered by the city.
The Nationwide Basics
Your city will likely refer to your shed as some kind of "accessory structure," meaning it is on the property but not attached to the house. The structure should not butt up directly against the property lines, though we don't understand exactly why. It is supposed that this minimizes the chance for disputes. Many governing bodies also have height restrictions on accessory structures, usually putting the cap of storage sheds around 15 feet. Further restrictions may involve minimum distances from the main house, special restrictions if it is to be close to a structure on an adjacent property, and additional height restrictions. For example, if you have a sloped roof, some places calculate the height as the average of the top of the roof and the roof ridge.
Minimum size threshold for permits
Though your shed may be small, it still has to adhere to zoning requirements. That is, you can't put a small shed in your front yard, nor build one that is too tall, or very close to the property lines. However, you won't have to go talk to the planning department in your city and wait for a permit. The specific threshold for requiring a permit will vary from place to place, but a suburban standard is 120 feet square.
Hidden Consequences of Building a Storage Shed
One restriction many people overlook is the maximum amount of area on their property that is eligible to be covered by structures. It may be high, but it may be as little as 40 percent. Careful planning will have to be made if you are near this threshold, and you'll need to consider whether you will want to build an addition to your house someday. Going too close to the maximum with your shed will really limit your options for home improvement.