My shop has an apartment upstairs the guy before me built.
No kitchen, but a big living room, small bedroom, nice bathroom & a big walk in closet.
I use it as an office, and sleep there if we get back too late, or have a very early project to do.
It works nice, and if you do it nice & tight, zero issues with smells.
I have all diesels & my neighbor has all diesels and very very little smell unless he lets a bulldozer idle.
All walls are double & insulated, and the door is a very high quality steel model with a super tight seal.
Only has 1 small window over looking the shop, so not many spots to leak smells.
It's actually pretty big, ~500-600 feet, so I have a lot of crap stored in the closet & bedroom.
If I was to build one, I would definitely have no doors into the shop.
Door into a mud room or office, than into the apartment.
I'm looking at land now with some old shack or trailer so I don't have to deal with putting in a well.
I'm planning small cabin and big shop, ~3000-5000 depending on final design.
Some will be cold storage for the rig & bucket trucks.
I hate anything being left outside when I'm gone or in the winter.