Currently the small business has about 10 computers 1 FreeNas Server and 10 employees.
Until their recent move into a new office they have each had their own computer with local accounts.
However now they will start having employees use different computers at different times of the day.
This is where the need for Active Directory comes in.
What kind of server hardware would you suggest to fill this need. Additionally what kind of server software should I use. I was thinking Microsoft Small Business Server Standard 2011.
EDIT: The business is a simple service business which simply uses Microsoft Word, Excel, Publisher. They also use the Google Apps for Business, and one other online application (that is hosted somewhere else) So the hardware needs are minimal.
EDIT 2: The business is a non-profit so costs for software are very low thanks to http://techsoup.org so I'm mostly wondering what server software would be best for my needs without too much included that I won't be using.
Small-business-server is designed for just that use-case, it's a very strong product. As for hardware, we can't really recommend anything since needs are very dependent upon just what you do there and how it gets done.
Due to the fact the company only has 10 employees and doesn't need anything drastic, I'd recommend Microsoft SBS 2011 (Microsoft Small Business Server 2011). This would easily be able to cope with your needs, it's easy to manage and can hold up to 75 users if you go for the "Standard" edition or 25 if you go for the "Essentials" edition.
Regarding hardware, I'd personally say you only need one tower server to run all this. You could then have shares (if required), Active Directory and a lot more (however by what you've posted this is all that's required). A simple tower server (however the specification depends on their exact requirements, but custom builds are available) will easily be sufficient.
Hope this helps. Please feel free to ask if you require any additional help or information.
If your email and other needs are met elsewhere then you might like to look Windows Server 2008 R2 Foundation edition. This allows up to 15 users.
It can act as a domain controller as long as it is attached to the domain root (presumably to stop larger enterprises using Foundation edition as departmental servers attached to the enterprise domain). While the 2008 Foundation version only allowed one single Foundation DC per domain, the 2008 R2 version allows the Foundation server to be a domain member, but the 15 user limit still applies across both DCs if you've installed a second (best practice in any case).
Best of all, it only costs about $200 on Amazon, which is about 40% the cost of SBS essentials. I agree that SBS Essentials 2011 has a strong case too, but there are features in it that you are not likely to use, and AFAIK you cannot upgrade SBS to standard or to the higher end WSs. However if you outgrow Foundation, you can do an in-place upgrade to Windows Server 2008 R2 Standard edition.
Looking at hardware, Foundation will support just one CPU (can be multi-core though) and 8 GB RAM. A small server I really like is the Fujitsu TX120, I have one in my home office and it is really quiet, very small but it has a bunch of server standard features (remote control and monitoring card, ECC memory, SSF SAS or SATA drives). Energy usage is veerrry low.
If they're using Google Apps, you may not need Small Business Server, Windows Server standard may be enough. Honestly though, call your favourite vendor (IBM, HP, Dell, or the CDWs of the world) with the information you have (number of users, storage, backup requirements) and have them figure it out. :)
You're not going to need much in the way of hardware!
If your only requirement is the following "..now they will start having employees use different computers at different times of the day.", then perhaps you do not even need a domain. You can setup a cheap linux system with Samba for file sharing, and map/authenticate using mapped drives. Each user can have his/her own share. You can set up any number of local accounts on the client/user pc's with password protection. They just need to be trained to keep all of their important files on the server/mapped drive.
Remember, if the clients are not XP pro, or Windows 7 pro/Ultimate, then you'll be upgrading your user's pc's in addition to an AD server.