The county councils of Cambridgeshire and Northamptonshire are to apply for a joint alternative business structure (ABS) licence.
The councils operate under a shared service arrangement (LGSS) and have a legal department with a turnover of £7.5m.
Quentin Baker, head of legal at LGSS, said: 'The application will go in as soon as possible, someone is working on it at the moment.'
Unlike other councils, Baker said LGSS will not be seeking to enter an ABS joint venture with a commercial partner. LGSS will focus on public sector and third sector work.
'We are not going to compete with the commercial sector,' he said. 'We are focused on the public sector, or charities, or housing associations - which is an area we cannot currently work in.'
He said becoming an ABS will see the legal department expand further, after doubling its workload over the last year.
Several councils have now moved to acquire ABS licences. Last month Kent County Council was given the green light for its legal department to apply to become an ABS, and will tender this summer for a commercial partner in a joint venture.
Buckinghamshire County Council, and the Buckinghamshire and Milton Keynes Fire Authority also intend to form an ABS.
Philip Thomson, incoming president of Lawyers in Local Government, told the Gazette earlier this month that change is imperative if council legal departments are to survive, as more services are being outsourced. 'If local government lawyers stand still, our work could evaporate,' he said.
However, Baker said the opportunity to increase revenue was more of a factor for LGSS, as its host councils are not aggressively pursuing an outsourcing programme.