I don't think there's a "best way", because every child is different, buuut I think it's important to teach a kid right from wrong at an early age. I don't agree with hitting, even if the child continued bad behavior. Whenever he/she does something wrong, I would sit him/her down, lower myself to their level and tell the child what he/she did & why it was wrong. If it continued, I would give him/her time out for about 10 minutes. & After the time out, I'd ask the child if he/she knows why they got time out and to apologize for whatever he or she did wrong. Eventually I would assume they'd get the hang of what's right and what's not right.
There is no best way, it depends on what the kid likes what you can take away till they act right or what you can't let them do till they act right. Some kids might do what they are told if you take away their favorite toy and others might do it if you tell them you wont read them a book when they go to sleep. It all depends. You can try talking to them seeing why they are acting the way that they are acting and try to explain to them why the way they are acting is not good.
By explaining to them (calmly) why their behavior is not acceptable and rewarding them with love when they follow the rules of the household...
In certain cases the removal of 'privileges' helps to reinforce better habits in children- that is to say- help them become more responsible and accountable for their actions.
I hope (that with your posted age) you are not asking in regard to your own children....
omigosh! you guys are up early! it depends on what the kid did... id say don't do anything to physically hurt them, maybe sit them down and use a gentle voice that still initiates that you have the power ;)
they arent minee.