A toolshed is the little garden hut where spades and hammers live. Cobwebs, a smell of creosote, and a wasps' nest every third summer.
It differs from an ordinary shed only in what is kept there, and most sheds become toolsheds eventually. The word is written as one word or two. Britain has a whole culture around the shed as a retreat, and Shed of the Year is a genuine competition. What is actually in one is usually half tools and half things nobody could throw away.
1nountoolshedA small outbuilding for storing tools.
“The shears are in the toolshed behind the greenhouse.”
Also accepted in games: shed
From tool + shed.
Etymology from Wiktionary, CC BY-SA