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 itsis 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 itand is. If you can substitute it is for itsin 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 itsdoor is scratched.
So Penny’s has a Honda, it is blue and it is door is scratched. The first itsis 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.