Definitely take it back to hard dirt. Good firm base, not going to rot away and sink down.

• clean down to bare, hard ground;
• cover ground with a few inches of crush gravel, level and compact it;
• build your frame on top of this gravel;
• butt connect 2 4X4s by sistering a 4' length of 2x4 inside along the butt joint and secure with 2 or 3 carriage bolts on each side of the butt join. This joint needs to be strong;
• fill the outside perimeter of the foundation frame with gravel, so that rodents cannot live under it. (skunks do this a lot where I am). I would fill the whole foundation to the top of the 2x4s to not risk it. Actually, I would just pour a concrete foundation.
• all lumber on the ground should be pressure treated and any cut boards should have the ends treated.
• if the area is prone holding water on top, consider raising the area with dirt so in the end, your foundation never sits in water. Pressure treated lumber ain't what it used to be.
• Good Luck!

Remove the mulch down to bare dirt. Over time the mulch will decompose and the shed will settle on you.

Cut one of your top boards in half, so on the bottom you have 2 8 footers, and on top you have a 4, then the 8, then the 4 footer. That will stagger your joints.

You could also drill through both Timbers, and pound some rebar all the way through into the ground. (Drill at least 6 inches from the end of the Timbers to prevent splitting.)That would be the best way to tie the Timbers together, and to anchor your frame to the ground.

Remove all mulch.

Get some chicken wire and lay that down on dirt before gravel. Attatch the chicken wire to the edge of your shed frame. This will keep vermin out of shed, otherwise it will be the home to something.

Agree with Tkajohn that you need to go down to bare dirt.

Use redwood stakes to secure your perimeter foundation "sleepers" (the 4x4's) in place. You can sister one of those stakes across the butt joint. Or just use a flat nail plate or tie plate. I'm not quite sure if the stakes or a nail plate (or any other hardware) would properly counteract the outward pressure of the gravel over time (like how a cardboard box full of wet sand wants to bow out the sides of the box). I suggest adding another 4x4 across the floor plan of the shed at that point, then use one bigass tie plate at the three-way joint where they all meet (like if there were two monkeys pushing your sleeper butt joints apart, you can just tie their tails together to cancel their forces). Clear as mud, right? Um, okay, have you seen those picnic baskets that Yogi bear likes and they have two lids that hinge in the middle? I am suggesting that your sleepers are like the rim of the picanic basket, and that you should add the piece that goes across the middle (where the lid hinges connect) to tie across the long sides.

Save yourself HOURS of fucking around to level your sleepers by purchasing 6 bags of construction sand. Dig a 5" wide trench (with your dirty pickaxe) where the sleepers will sit, then fill with an inch or more of sand. Smoothly smoothy-smooth the sand to make a level bed for your sleepers. As you level the bed, and you hit some dirt that you didn't quite get out of the way, then use your thinking brain to resist the urge to level that dirt. Scrape that crap out of the way immediately with the claw side of your dirty hammer. Take out a little extra. Then just put in some more of that sweet sweet construction sand. Smooooooooth it out like a dream baby.

Before you even start digging, you can temporarily build or place your sleepers where they will go. Use your new four foot level* to find your low spot. That's where you must dig the least. The high spot is where you must dig the most. Yes, this is highly technical shit here. Hang on to your girdle cuz now we're gonna get real crazy:

Move your temporarily connected rectangle shaped sleeper agglomeration about 6" diagonally sideways away from where it actually belongs. Use a bunch of old stakes, plywood scraps, used Earth, Wind, and Fire 8 tracks, and whatever other flat garbage you have around to Shim Your Foundation to be Truly Level. Also, use your new FATMAX 16' tape measure to measure across the diagonals and make sure your sleeper building footprint shape is Truly Square. To paint a picture, your shed foundation will be sort of floating above the ground, sort of right next to where it needs to be. Congratulations! You can tell exactly where to dig-- it's right next to those floaty boards! You can tell how deep to dig-- measure from the top of your foundation down to the bottom of your hole the same distance all around. You can tell how high the top of your sand should be-- again, it will be the same measurement down from the top of sleeper all around.

Ok, that's cool that you can measure down to the sand, if you want to, but listen man... check this out, what ifffffff you screeeeed the sand? Have you ever heard of that shit, man? That's when you cut some boards with your milwaukee brushless cordless 6.25" circ saw-- and, like screw those fucken boards together all crafty like --- this might be like 3 fucken boards or something-- so that its like a measuring device to measure down to to the top of the sand, and then you slidey slide that device to actually smooth the top of the sand to the specific measurement you want. That is screeding. Screed your sand all around until the perfect flat top of your sand bed matches the perfect flat top of your sleepers.

If you have enough helpers then you can just all lift that foundation off it's shims and lay it onto its sand bed. Recheck diagaonals. Stake into place. Fill with gravel. Compact (you can do a passable job of compaction with just a frikkin 4x4 post. Don't buy that piece of shit 10x10 tamper with the wooden handle). Lay pressure treated plywood over compacted gravel. Use more nail plates / tie plates to fasten all the plywood together.

Then build your shed.

*your hardware store has a bunch of levels for sale. Some of them are accurate! An accurate level will read the same when you flip it over, or when you flip it end for end. If you check five levels for accuracy you will probably find 3 that are accurate for level. Then check the two bubbles for vertical! It takes 15 minutes to find a good level.

If you don't stand your 4' level against the wall then it can't fall down. Lay your beautiful blue Empire level flat on the ground after you use it.

Remove the mulch. Add gravel. Put your shed on the gravel.

A few comments: Check and see if you need a permit for that size. That is over the size limit for a no permit accessory building in most jurisdictions.

No need for any 16 foot boards, just run your joist in the 12 foot direction.

If I was spending the money to build a shed with the cost of materials this these days, I would have the joists sitting on doubled up two by tens, running the 16 foot length. Those would be sitting on pier blocks dug into the ground. If you angle the ends, you would be able to drag the shed in the future, or jack it up and get it onto a trailer to sell it, or move it.

There are lots of plans for free available on the Internet on how to build a shed that will answer many of the questions you have. Also, since I haven’t seen it mentioned, you should have plastic sheeting below the foundation to keep moisture from rising up and rotting out your framing. I live in the Pacific Northwest, and would use pressure-treated wood for my foundation.

You definitely need to remove all of that mulch because it appears to be pretty thick. It's going to require some serious sweat equity. Honestly if you're going to spend the time and money to build a nice shed I would pour a slab