Thanks to the wonders of that new-fangled device called the intrawebs, collaboration between states/continents/etc. is easier.
Keep in mind though, that EVERYONE in the project needs to have the same software for composition and if any one members buys a sound pack/refill/extension pack/whatever, the rest of the band must buy it to maintain consistancy. It can end up being costly, espeically if your budget is anythign like mine.
I suggest starting out with the cheap route, Logic Express(roughly $250-$299) will give you enough to get started. Logic, however, is owned by Apple and thus only runs on macs.
For PC's, there's Cakwalk(now called SONAR I think). With the PC, there are TONS of soft-synth plug-ins and VST effects, a lot of them free as well. But again, you get what you pay for.
For recording of actuall real instruments, the people playing said instruments will have to invest in an audio box for the computer. There's tons of stuff out there but I'm partial to my mac since it uses Firewire, something that PC has decided to shun.
Again, make sure everyone in the project is keeping up to date and has the EXACT same software. Otherwise, big discrepancies can occur. And that is my $0.25.