This story first appeared in the August 2006 issue of Entrepreneur. To receive the magazine, click here to subscribe.

You expect your lawyer to represent you zealously, protect your confidentiality and loyally defend you. So what if your lawyer also represents a close competitor?

That's not necessarily a bad thing--unless you're suing that competitor, or vice versa. It's often a plus to hire a lawyer who specializes in an industry and understands its issues. But if you want your lawyer to double as a business advisor or serve on your board of directors, keep in mind you'll have to expose trade secrets--your business plans, strengths and weaknesses.

State bar associations require lawyers to abide by a code of conduct that addresses conflicts of interest and prohibits them from revealing confidential information to others. Ask yourself: Does my lawyer know things that I want to keep confidential, which the lawyer would otherwise disclose for the benefit of another client?

When do the drawbacks of having a lawyer who represents your competitor outweigh the benefits of having a lawyer who understands your industry? When both companies are bidding for the same contract, or when the rivalry lands in a courtroom. But the crux is this: The lawyer is required to review every client relationship and each business dealing regularly and tell you if there might be a conflict of interest, so you can judge for yourself whether to continue.

Jane Easter Bahls is a writer in Rock Island, Illinois, specializing in business and legal topics.