Right, and the state also has a role in limiting negative externalities affecting parties who are not involved in the initial contract, for example a factory upriver of a town can be fined or brought to court if their plant insufficiently prevents harmful industrial runoff from seeping into or saturating said town's water supply. Regulations in and of themselves are not bad, as they lay ground rules. However, they are definitely prone to being overused, abused, and corrupted. There are certain cases where regulations are underused but it seems like those are relatively rare.
Personally, I'm more in favor of a system that encourages as many small and medium business as possible, primarily based around the family unit, with strong trust-busting measures/laws in place. Private property (which doesn't simply mean land, but it certainly helps) should be widespread among the populace. Of course, there should be well-defined protected areas set aside for nature conservation and to prevent over-exploitation of the land (this was a common problem in Texas during the turn of the century where ranchers bled the land dry with overgrazing, causing an ecological catastrophe from which parts of the Panhandle never fully recovered).
Eminent domain should be extremely limited in scope and hardly ever used. The construction of the interstate and especially the inner-city highway systems was a massive act of government overreach which destroyed tens of thousands of established communities and small businesses, and led to the decline of the great American cities into what we see today. A lot of the hyper-corporatism, social atomization, hyper-individualism and lack of entrepreneurial spirit seen in much of North America today is a result of that. It created the supermarket and strip mall consoomer class.
Edit: To simplify, I recommend some form of distributism (note this does not mean state-sanctioned redistribution, it refers to private property being widely distributed across the populace. Maybe 'popular capitalism' is a better term.)