How to format a drive for networked Time Machine access

Time Machine can use APFS for backups starting in Big Sur, but that seems to prevent networked backups.
macOS Big Sur Time Machine icon

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Glenn Fleishman’s most recent books include Take Control of Zoom, Second Edition, Take Control of Your M-Series Mac, and Take Control of Securing Your Mac. In his spare time, he makes Tiny Type Museums. He’s a senior contributor to Macworld, where he writes Mac 911.