Puppy gets aggressive/ready to attack when sleepy

Question
QUESTION: I have a 12 week old "mutt" he is the first dog I have found to be absolutely perfect or so i thought. He was always really gentle and loved to cuddle he never barked and reminded me of a cat which is why i wanted him cause i can't have cats. Anyway yesterday i noticed him sleeping on my nieces lap and she had to leave she tried to pick him up and he started growling kinda viciously...then tonight i came home he greeted me as i got out of the car and i picked him up and took him to his bed in the house and he layed down. My children went to pet him and the vicious ready-to-attack mode came out I told them to get away from him and i tried to pet him and he started growling finally after a few tries he let me pet him and when i tried to see if he would let me pick him up he started in again and even tried to snap at my hand...which at that point out of fear i slapped his nose and he started barking and crying...i tried my best to keep calm i picked him up and put him outside and he started barking when i put him out not at me at the street which i found very odd because he doesn't bark-EVER...After that i went outside and sat down he climbed on my lap and fell asleep as if nothing happened. I really want to know what to do because besides this he is absolutely perfect for me i also own his mother so i've had him from the beginning so i can rule out rough handling from the kids cause he was always ready to let them hold him...i don't want to get rid of him but i do not want to be on guard and let him rule me! what do i do?

ANSWER: He's only 12 weeks old. He's just a baby trying to learn how to get along in the world. think of him like a two year old. Very young puppies don't bark but they bark more as they get older.

Give him a firm foundation and make sure you get him out to socialize with other dogs and people right away!! You're losing your window.
Use the tips here to set that firm foundation http://www.thegooddogjournal.com/2009/02/whos-boss-establishing-pack-leadership.
One thing I can tell right off, you're picking him up too much and allowing him in laps is a no no.
And don't slap him. That doesn't help a bit.

---------- FOLLOW-UP ----------

QUESTION: I did follow the link and found all the information useful. My question is; is there some certain thing i should be doing when he starts to growl at these times? Walk away or what? And I don't completely understand why not to let him sit in my lap but I have noticed now when I sit he thinks it's bedtime, I was only trying to show affection for him hoping he would trust me. But yes I can see that I do need to firm with him but as for now I just want to break his habit of getting ready to bite if we bother him, I have only seen dogs do this when they're eating, which is more understandable. And i just wanted to make sure this wasn't the beginning of a "mean" dog.

Answer
When he growls, just carry on as if he's not. Don't punish or reward but make it clear that his growling is not going to change the way things have to be. In the case of the kids, however, they must learn to heed his warnings so he never learns to skip the growl and go straight to the bite. I would also get in the habit of waking him up and slipping him a treat every once in awhile while he is sleeping so he learns that getting woke up is a good thing.

If you let him sit on your lap all the time he will start to think he owns you. He is also more likely to develop separation anxiety later.