First of all, all dogs like to be on furniture because it satisfies their instinct to be in a heightened place where they can overlook their surroundings. The physical height can also be an indicator of their rank (I'll come back to that later).
So, is it bad? No.
As far as humans are concerned, there are very different reasons why people don't want their dogs on the couch.
Dirt and hair
Dogs step into dirt, dig through mud and trash, sometimes roll in poop and constantly shed fur. It's no surprise some people don't want that on their couch.
If this is your concern, you can put a blanket or towel on the couch and teach your dog that she's only allowed to sit on there. The blanket can be washed or replaced and the couch stays clean. Depending on how obedient your dog is, it can work so well that she doesn't hop onto the couch at all when her blanket isn't there.
Damage to the couch
Some dogs scratch at soft surfaces to make a bedding for themselves. You could protect the couch with a blanket or scold the dog for doing this. As long as you don't ignore the problem, it's easy to correct this behavior.
Some dogs don't get walks or playtime and start chewing up pillows and furniture out of pure boredom. That's not the fault of the dog, but the owner. If you don't entertain your dog, your dog'll find entertainment all by herself. And you won't like that.
Damage to the dog
Yes, very small dogs have very delicate bones and joints. Some vets recommend not letting small breeds like Chihuahua, small Terriers, Basset Hounds or Dachshunds hop down from a couch because it could lead to increased joint wear in the long run.
Simply provide a ramp or a dog stair.
Dominance
This could be a real problem but is more likely to happen with male dogs than females. As mentioned before, the height of a dog's resting spot may indicate this dog's rank. If a dog has the tendency to dominate the family, allowing him free access to the couch can make the situation worse.
Not letting the dog sit on the couch (or bed, or chair) at all is the most simple way to avoid dominant behavior. Having the dog "ask for permission" and sometimes denying this permission is another way that works, but may look for an outsider like a human bullying the dog on a random whim for no reason at all.
My own (male) dog has different phases when he is more or less dominant. Letting him hop on the couch whenever he likes noticeably increases his dominant behavior and has led to aggression against us when he didn't want to go off the couch.
Denying him the couch completely has changed his behavior from "dominating all of us" to almost timid in 3 days. But it also decreases the amount of social interaction and petting he gets by a great deal. We opted for the compromise (asking for permission and sometimes being denied) to give him the affection he needs, but making sure he knows his place.
Her space?
In the end, your entire house will be "her space". She won't be sad if she's never allowed onto the couch and she won't start terrorizing you if she's allowed to. The couch is just one aspect of your shared life. Whatever you decide, you should both agree to follow the same rules. If one partner never wants the dog on the couch and the other secretly allows her up, it will be the dog who suffers the scolding and confusion.
