TL;DR warning.
While using 'proper' joints is the way that some shed walls were constructed in the recent past* I think I should say something about why this isn't done as much today — because other ways are faster (much faster) while still producing a structure that's fit for purpose.
There's a strong parallel to be drawn with the way that a traditional timber-frame building was, and in some places still is, put together versus a modern house roof frame. The traditional timber frame uses various well-cut joints that intersect nearly perfectly, then often locked in place with pegs, and originally a house's roof frame would have featured some similar joints (derived as they were from trad timber framing practices). But today there's almost no actual joinery and we largely rely on metal hanging brackets, nails, screws and bolts.
Now it could be argued that the old way was better, producing stronger buildings that hold up better over time, but even if we accept that as a given there's no denying that the modern way produces structures that are strong enough. And they can be made significantly stronger than the norm by just exceeding code (e.g. using more numerous and/or longer fasteners, screws instead of nails in certain places, using every hole formed in a joist fastener and not just the minimum required by the regs).
So my advice would be to go ahead with this sort of construction** only if you want to do it as an exercise in laying out and cutting of joints, for the pride in knowing how the shed was put together when you're done.
But if your primary goal here is merely to end up with a solid shed then be confident that modern metal fittings, galvanised nails or screws will produce a structure that's good enough, both in terms of strength and longevity. My parents' back garden had a shed in it that was taken down recently; it was made of softwood of indifferent quality as most sheds are over here are and was largely put together with staples (yes, staples) and yet it withstood plenty of bad weather, including two or three hurricanes, in the 30+ years it stood without losing its roof, being structurally undermined or even losing a single siding board. It was heavily weathered when it came time to take it down recently, with many loose boards and some rot. But it still had to be cut apart using a reciprocating saw! So build just a bit better than this and your grandchildren will be wondering what to do with the shed grandpa Snyder built way back in 2016 :-)
*For a bit of historical perspective, I have electronic copies of carpentry books dating from 1875 through to approximately the time of the First World War and looking through them just now none show joinery used for stud wall construction that I could find. All the drawings appear to show basic butt-jointed timbers used throughout, presumably to be toenailed in place as is common practice today.
**But not exactly what you've shown. The orientation of the wood in the rail in the Sketchup image doesn't make best use of the strength of the wood. It should be edge-up, not face-up, to best resist bending forces (maximising 'beam strength'). And with this orientation you wouldn't go ahead with your planned M&T joints, a better fit would be half-laps. You could use bridle joints as an option but they're more difficult to cut and probably provide no real improvement in strength.
