So, I'm sure at one point or another we've all based a character on someone we know. Well some might be flattered there are others we are glad don't read. So, what's the problem if any of racing your character off your old friend Bob? He looks like Bob. He does the same kind of work as Bob. He dresses like Bob and so on. He's real Bob in a fiction story. Can I call him Bob? Real Bob and I haven't had contact in years and I don't imagine we are likely to ever talk again. Plus, he's not going to read it. Even if someone told him about it, he still wouldn't read it. And he just wouldn't care about this sort of thing. On top of that I'm not even sure there's anything wrong with it. What do you think? Have you dealt with a similar situation in your own writing? Did you still call him Bob?
Can't name any off the top of my head, but plenty of authors do this. I've never done it, but I always thought it was cute. I mean, as long as you portray them well and don't, like, murder them in your story. If you want to talk legalese, might want to put that old "any likeliness to any real-world people are purely coincidental" note in the front page.
Just "Bob", no last name? As long as the name is as common as "Bob" is, then, sure, why not? (although, also... why?) But I wouldn't include a character with the full or unique name of anyone I know, and I certainly wouldn't match a full or unique name with the characterization of the real-world person. I don't see an upside to doing it, and there's a potentially significant downside. (Most novels still have that "any resemblance to anyone living or dead is purely coincidental" disclaimer in the front... it'd be nice if the first pages of your book didn't contain an outright lie.)
My characters often have traits of people I do know, but they aren't entirely anyone. And I would never give a character the same name as someone whose base traits or looks I've used. It would be weird for me, I can't imagine how weird it would be for them.
I don't know legally what the implications would be if 'Bob' read it and took offense and could prove that you know him and all the similarities between him and your character. I think the others are right in that it probably depends on how common their name is and how much of a readership you will have. Personally I don't think this is something I would do for other reasons too, because having one character based that heavily on someone I know and using their real name would take me too much out of the writing and the story. It would feel too much like a constraint to keep trying to keep them true to life rather than having a character that can grow and change, so in terms of real life inspiration I use people I know as just that - inspiration rather than the be all and end all of the character. That is just personal preference though and I don't think there's anything inherently wrong with basing characters on people you know.
I rip off everything about everyone I know or see. Appearances, mannerisms, slang, philosophies, whacky behaviors, personal stories... especially the stories. Anything anybody tells me is fair game in my book. And people who know me well will often tell me something, see the look on my face, and say, "Shit, you're going to use that aren't you?" to which, I say, "Uh-huh... it's mine now." Having said all that, I would never use anything that would be potentially hurtful or damaging to someone I care about. And I never use similar names. I just don't see the point of it. Why open an unnecessary can of worms? The traits are what counts... the name itself adds nothing.
I would change the name and at least a couple of physical details, just to play safe (you never actually know who's going to read it and get offended, even if it's just his mother). Especially if it's being published electronically, because how many people google their own names every so often? - most of us
Traits, yes, names never. And usually, I'll mix things up by combining traits and characteristics of more than one person. Or, like I did in my current WIP, split one real person into twins plus give them something extra. Am I tempted to make a couple of my exes into characters? Yep. Would I? Nope. I also alter real events. For myself, anything else would be lazy writing in a supposed piece of fiction. Otherwise, I'd get permission and do it as a nonfiction piece. ETA: Also, social media comes into play. if you use Bob's name and Bob's characteristics, and you've got Bob as a Facebook friend, all it takes is one crazy reader who stalks all your FB friends to make Bob lose his anonymity, and Bob's life becomes hell.
Not everyone would consider it cute though. As a really private person, I would hate that and probably never speak to them again.
Use the Small Penis Rule to get around this. Whenever you have a bad character who is based on a real person in a very obvious way, and do not want to be hit with a libel case, the most common trick is to also associate some very negative quality to that individual in your story that the real person either doesn't, or won't admit to. South Park uses this trick extensively.
Yeah, it's like an in-joke, but as your readers aren't in on the joke it really serves no purpose except maybe to tickle the writer. I've actually be guilty of doing this in the past (not the name thing but a wink/nod to something personal) and each time my editor has been confused by why it's there and questioned its relevance.