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Welcome to the community. The answer is - of course you can do that. It is also possible to develop the database while it is hosted on the server - that allows you to take advantage of the server backups. Very handy when you so something "brilliant" that later turns out to be very "silly" - you just pull a good copy of the database from the server backups. You can run the backups quite often on server. If you develop on a standalone computer do frequent backups.
"Everything should be made as simple as possible, but not one bit simpler." --- Albert Einstein
Thank you for your response, Stephen.
The reason I need to do this, is because the server will be on a different site to where I am doing the development.
As long as the server resolves to an outside IP and the firewall points to the proper ports back to the FM Server (TCP 5003 I think) you can do it. Please be aware, however, that things might be a bit slow if you are connecting from a slow internet connection.
Also, be sure you think about the security of the database as ANYONE can access it when it hangs out in the wild on the Internet...
You can also set up a port forward at the site to allow WAN access to the Filemaker Server databases. You need to have the router there forward requests on port 5003 to the inhouse IP of the Filemaker server. You can then, from within your Filemaker client, "Open Remote" and input the IP address of the remote site. Perhaps not ideal for development but useful for maintenance.
I should point out that with the $99 subscription to this forum a dev copy of server is provided for the developer to take advantage of the benefit of scheduled backups, as Stephen has stated. Of course there are other benefits to having the Dev version of server and the enhanced technet subscription, but scheduled backups is certainly a good one.