A lot of mistakes are made with the use of the word it’s and its.  I think some confusion comes from thinking of it in terms of the possessive.  Normally, you place an apostrophe before an “s” in a word to show possession.  So, Penny’s would show that the word following Penny is something that belongs to her.  Penny’s car, Penny’s hair, Penny’s birds, etc.  The word its is an exception.

If you are unsure of which form to use for its, think of it this way:  It’s is a shortening of the two words it and is.  If you can substitute it is for its in your sentence, you use the apostrophe.  If that does not work, you do not use the apostrophe.

Penny’s has a Honda, it’s blue and its door is scratched.

So Penny’s has a Honda, it is blue and it is door is scratched.  The first its is describing the car and it is can be substituted. The second its, talking about the car’s door, does not work to replace with it is, so you don’t use it.

So, just ask yourself, can I say it is instead?  If not, no apostrophe, if so then use either it is or it’s.