Unable to Add Entity Model to Silverlight 4 Business Application

I decided to try out the Silverlight 4 Business Application template in VS2010. I just wanted to see what the template produced out of the box. When I created the “BusinessApplication1” project it created both the Silverlight and host web projects for me which I expected.

Next, I wanted to add an entity model to the web project to support a new domain service. However, when I went to add the new item to the project, I received the following error: “"The project's target framework does not contain Entity Framework runtime assemblies..". That’s interesting since out of the box the template targeted the .NET 4 framework.

I found that that only way to clear up this error was to do the following:

1. Change the target framework for the web project to .NET 3.5 and rebuild. The compile fails because the new code requires features from .NET 4.0.
2. Change the target framework back to .NET 4.0 and rebuild. The compile now succeeds.
3. Now I can add the entity model to the project.

Looks like there’s a small problem in the business application template in terms of the web application project file.