That's how we're running our start-up (which, admittedly, is still quite small). We (the "active shareholders") meet physically once a week, but have no central office.
As for the development team (3 people), one of us actually lives in the States most of the year, so we don't meet physically very often - instead, we have iteration meetings 3 times a week on Skype. Tasks are broken down so that they fit into 2-day chunks of time to make it easier to measure progress.
There are certainly challenges, but I think if you're in the same geographical location they're not too hard to overcome. Good luck!
As for the development team (3 people), one of us actually lives in the States most of the year, so we don't meet physically very often - instead, we have iteration meetings 3 times a week on Skype. Tasks are broken down so that they fit into 2-day chunks of time to make it easier to measure progress.
There are certainly challenges, but I think if you're in the same geographical location they're not too hard to overcome. Good luck!