using a real location

If you use a real place, use the real street names. Otherwise, people will assume you just didn't do your research.

The businesses are a little trickier--you can use the real names if you're just mentioning them for color ("I was glad to see Mr. Ed's Feed Store was still in business"), but if you set events in one of them, make sure there's nothing actionable. Like, if you use the name of a real restaurant and imply the cook is lacing her chowder with botulism, they could potentially sue you. But just having a couple eat at the local diner should be fine, especially if they enjoy their food.

Also keep in mind that using real businesses could date your book--if you're specifically setting it in 2014, that's okay, but if you're using an undefined "today" then using the name of a place that's gone out of business by the time your book comes out might make it look dated.

My novel takes place in Lincoln, Nebraska, mostly in the university (UNL). I've used a real restaurant just south of the uni, real building names, real street names, generally tried to be as factually correct as possible.

At the other end of the scale, I've read books where the author invented a suburb of Los Angeles from scratch, even twisting the fabric or reality to insert some land between real ones.

This, or anything in between. Just a question of what you prefer, and what will or will not work with your story.

Whatever you decide, your setting has to work for your story. I think it can be fun to set a story in a real place, and do it well enough that someone could visit all the places you write about. My ill-informed opinion is that the legal repercussions of this are effectively nil, and if anything, a local business owner would probably enjoy the attention. (I've been in a few bars and restaurants with framed pages from novels on the wall that mentioned their business.) All that being said, the geography has to work for your story, so don't let verisimilitude stop you from presenting the action exactly as it needs to happen.

I wouldn't really worry about being sued. Unless you are using actual names of people who own/operate the businesses, I would assume you could say Joe's Steakhouse tastes like rubber and be perfectly fine. Just don't say Joe Blow the gentleman who owns the steakhouse lures children into his van with candy. Even then you might be fine. It's fiction and I believe there will be something that protects you against being sued. I wouldn't worry too much about it. I'd assume that if you create fictional characters within a real setting, anything goes and you should be fine. As far as details, be as specific as you like, or don't. If you start naming actual street names, then you will probably have to make everything about your setting pretty accurate. If you keep details like that out, then you will have more leash to create your own stores, businesses and scenery that don't actually exist in the real life town.

I've read quite a number of books who used real businesses in their novels. One that comes to mind is James Patterson. But I agree with what some of the other posters mentioned, if you're going to use actual businesses for backgrounds, it shouldn't be a problem. I believe that's how Patterson used it in his book. I also heard that some authors received trinkets from the business because they mentioned the business in their novel.

I used real towns/cities, but I didn't use the actual locations and street names due to the content of my book.

All of my stories are set in real places (most of them local to me). I use real suburbs and street names, but not real business names. Partly I don't want to run the risk of accidentally defaming someone. They also have no meaning to most readers, who have never been to my local area and wouldn't know whether or not the businesses were real. At least in creating fictional ones, I have total flexibility in how they're executed.

I tend to use real cities, real streets, real locations. Of course, I write sci-fi, so I also have alien invasions and time travel going on. Having a touch of realism helps the unbelievable become believable. If you can say, "The alien ship landed at #10 Downing Street," and readers know there is such an address, then it's easier for them to accept that aliens have just landed and are trying to take over the government.

If I have a novel with real settings, but I'm not familiar with a particular location, I keep it vague. For example, most of my second novel takes place in London, for which I used real street names and locations, but when my MC visited Boston, which I'm not as familiar with, I dropped a few names to make it realistic (Union Oyster House), but avoided mentioning street names or other specifics. When I need to shift it somewhere not-real, then I make things up completely. So when the same MC popped up to a post-apocalyptic Canada, I invented a city, made up a history, and described it as best I could. It worked just fine.

I used real towns and streets in my books. I think it lends some realism to the story, especially if it is a realistic story. However, there are good reasons for using fictional locations. Use what fits.

I stop short at using real addresses. To me thats like using an actual phone number. I might use a real street, but I'll fabricate a house number that I know doesnt exist, just in case (if I have to mention it at all)

As long as you don't disparage the businesses or put a gruesome murder in their store (or the like) then you should be ok. I would think most businesses would love the free exposure.