Reason:by putting your work up on a public site, you have already published your novel. You have given up your first rights, and without that publishers/agents tend to lose interest or you'll be paid a lot less money. After all, publishers are trying to make money by selling a fantastic book, but who is going to buy something when they can get it for free?
That's the reason I have different Ljs. One for normal stuff about my day and whatnot (usually public/friends), another to post chapters so I can delete them from my hardrive (private/friends-but I don't friend people on it), another for chapters to be critiqued by others(thus,friends setting), and the last one is where I'll move completed chapters that I'm completely happy with (private or friends, but only with the people I completely trust)....of course, I could've just subgrouped my flist, but I had already made the Ljs before I even thought of doing that :0
Since it's your story, it's your call of what you want to do. But, at least, you know something about protecting your works.