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Private registration is beneficial in that it keeps your name and address out of the whois database. A company registers your domain as a proxy and their info shows up in the database. Basically, it is one way to minimize spam emails and postal mailings from businesses and crooks who surf the whois database to send you junk. It isn't necessarily a mandatory thing, but for the $10 or so more it costs per year I think it is worth the cost to cut down on the junk I get from public registration.
I do it on all my domain names, just an added level of security. Plus I believe your mailing address is listed if you do not do private registration, which isn't a great idea.
It also has it's drawbacks. Many associate it with scammers trying to hide their identity. With all the fear of scamming and identity theft, it is a good idea to be just as open and aboveboard as you can be.
I do not know this as a fact, but I would not be surprised if some merchant account providers and SSL certificate providers would refuse to deal with anyone with hidden information.
Again, I do not know that is true, just a hunch. I know that 6 or 7 years ago I could do about anything I wanted with a merchant account. Now, if you apply they want to see the site, want specific language used on the site, etc.
Personally, my FULL contact info is on the bottom of every page I put up, and that is quite a few. Click any of my links and you can see.
More than anything, you want to project an image that you are who you say you are, that you have nothing to hide and that you are easily accessible.
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for the $10 or so more it costs per year I think it is worth the cost
It doesn't always cost more.
I have it on more or less at random on some of my domains and not others. I don't think enough people do a whois lookup for it to really matter, and I consider it being a bad net citizen to hide registration information. Nevertheless I don't like spam either, so with different registrations the decision has gone in different directions.
It isn't necessarily a mandatory thing, but for the $10 or so more it costs per year I think it is worth the cost to cut down on the junk I get from public registration.
$10 a year isn't bad if you have just one domain, but when you have a bunch of them like many do, it can get very expensive.
I have roughly 30+ domains with sites in various states of functionality. I probably have 90% of them on private registration and even at the extra $10 its only a few hundred a year. Compared to when I started building sites and registration was nearly $80 each, the $8.95 +10 for private is a deal....
The worry about scammers and ID theft is likely more a concern if you hide the contact info on your business site. On all of my eCommerce sites I have my full contact information (PO Box, 800 number, email) but I do not put it in the WHOIS because of the junk I got before private registration was available. Customers want a way to get in touch, but I don't think they are looking in the WHOIS to contact you.
Before the privates I would get loads of those little pseudo-invoices from fake or shady companies asking me to "RENEW" my internet directory listing, or to pay an invoice to renew my domain registration. The problem is, I never heard of any of them, and never had done business with them before. So whoever they were, I pitched the invoices and kept paying NetSol or whoever I had registered with. Unfortunately, many clients I did sites for went ahead and paid only to have their domains or hosting hijacked by some unscrupulous business that sent out fake little invoices with loads of small print no one took the time to read.
As to merchant accounts, I have two different ones and have been through 4 different providers. I have yet to be asked about the private registration and the typical questions revolve around my business license docs, proof of my business checking account, and on some occasions proof of having an online return/privacy policy. My secure certs have been no problem either and often require less than the merchant accounts.
I think if you give out information on your site, your customers will easily see it and be plenty happy to get in touch that way. Most customers aren't checking the WHOIS. The folks running WHOIS queries are scammers and spammers looking to send you junk. The private registrations forward any necessary legal documents or "real" business documents they receive on your behalf, but get rid of the load of crap that comes otherwise.
Just goes to show you. I've got 35 or so domains, none hidden and never get that particular kind of crap. No spam filters, wide open and never get the domain related things by email. Get a couple each year in the mail, but not online.
I do use a cgi script to juggle my email address on my pages, but I have the link everywhere. Most of my spam is stuff I signed for and can't get them to quit. Hit unsubscribe all the time, but it keeps coming. Mostly "Internet Marketers". Love that name, as if we weren't also marketing on the Internet...
Anyhow, to each his own. I can hit delete a lot of imes for $ 350.
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Private Domain Registration??? 
