Following error occurs when database which is attempted to be created is smaller than Model Database. It is must that all the databases are larger than Model database and 512KB.
Following code will create the error discussed in this post.
CREATE DATABASE Tests
( NAME = 'Tests',
FILENAME = 'c:\tests.mdf',
SIZE = 512KB )
Msg 1803, Level 16, State 1, Line 1
The CREATE DATABASE statement failed. The primary file must be at least 2 MB to accommodate a copy of the model database.
Create database which is larger than Model database and 512KB. Size of the Model Database will be displayed in the error message. If database is smaller than 512 KB it will throw error which I have described here : SQL SERVER – FIX : ERROR Msg 5174 Each file size must be greater than or equal to 512 KB
Reference : Pinal Dave (http://blog.SQLAuthority.com)