Having owned and run my own service-oriented business that employed a few people: For many of your customers and many of your employees, the naive and sunny approach works great. You can provide great service and have happy customers willing to pay you. You can have employees who are really friends just helping you to provide that great service with whom you split the proceeds. You can treat those customers and employees like everyday people. All is wonderful.
Then you come across the bad apples. You come across the customers here and there who don't want to pay you for great service, they want it for free. Even worse are the customers for whom you provide great service, but they want you to pay for some imagined problem that you caused for them because their expectations for your service were completely different than what you clearly provide.
Then on the employee side, there are those employees who thought that just because I started the business that I was somehow wealthy and living the high life. They didn't appreciate the year that I went without a salary or the risk that entailed. They didn't appreciate that I was overall making much less money than I could have if I had just gotten a regular day job. They didn't care about the loans with my name on them that would ruin my finances if the business went south.
When you come across a few of those bad apples, that's when all the rules and lawyers come into place. Your nirvana of work and customer environment can turn to crap if you don't have a little protection against the jerks. The phrase "this is why we can't have nice things" surfaces time and again in the face of those 1 in 20 sociopaths who interact with you as a business owner.
From my own experience of running a micro-agency, the "1 in 20 sociopaths" rule absolutely applies. I had three or four joyous years where I had nothing but satisfied customers who were happy to pay (not, it must be said, in a particularly timely fashion for the most part, but they paid without griping, which is the main thing); sometimes they were demanding and wanted an awful lot for very little money, but even in the worst cases, we got there in the end, and the relationships were good enough that they persisted regardless (and a lot of the time, the really great clients - who were not demanding and paid well - balanced out the other ones, so it all seemed good enough on the whole).
Then I had two awful clients in the space of three months - we did exactly what we always did, but they were, to be frank, just terrible people who didn't want to be helped, demanded the impossible, and then refused to pay when - unsurprisingly - we failed to deliver; with one, we ended up splitting the bill, and the other remains a bitter ongoing dispute. (There were actually useful lessons to be learnt in both cases, so every cloud...) Speaking to other people in a similar situation to me, the consensus is that I was just incredibly lucky for those halcyon years where it all just worked: one guy in particular said that his general expectation, based on his experience, is that at least one client will try to screw him every year; another guy I know builds a remote kill-switch into everything he delivers for precisely that reason (which I have always thought is horribly unprofessional and unethical, but I can now at least see where he's coming from).
Many people are good; a surprisingly large proportion of people will, even if they are good, try to get away with as much as they can regardless; and some people are just very, very bad.
Unfortunately, the difficult customers are always the ones offering the most money and general upside at first. They try to disguise how much they're going to try to stick it to you by luring you in with big talk.
But these are usually the same people that don't have the money, in my experience.
Sometimes you will have tough customers: but there's a difference between working with someone who is a no-nonsense person and working with someone who's impossible to work with.