your question: Do i have to add ADO.net Entity framework model in project, and design the database entities firt?
yes, in code first approach you need to tell entity framework what tables you are going to create, you do it by creating poco classes(Plain old CLR Object). then in run time entity framework will create a model(witch is a xml file) and generate query according to that xml file then executes it. you can read more about that in [CSDL MSL CSDL][1]
so for summary you write your domain classes(poco classes) and ef will create db for you but btw there is another way where in entity framework code first witch is called [Code first to existing database][2]
[2]: http://weblogs.asp.net/scottgu/archive/2010/08/03/using-ef-code-first-with-an-existing-database.aspx it revers engineer the databse and create model for you.