You can either be their boss or their friend. You can’t be both. Period. If you try to be their friend, you are doing them a disservice that will eventually cost them their jobs. What kind of friend does that make you?
In a lot of ways, being the boss is like being the parent – a lot of the same rules apply. Employees are smart – if you hire them right, many of them will be smarter than you, which is a good thing – but they usually lack the experience that you bring to the table. That experience and hands-on knowledge is what gives you the right to be the boss – it’s why you get paid and why they work for you. If you don’t have confidence in that, either go get the experience that you require or get out of the game: it’s that simple.
Just like children, employees need rules and guidelines to keep them out of trouble. They expect that. No matter what they may say, they want that.
How many? As few as you can reasonably get away with.