What should one do to avoid penalty?

The simple answer is, follow the guidelines provide by google.

In order to avoid penalty,
Avoid stealing images or text from other domains
Don't link to any other website with bad page rank
Avoid re-directing users to another web page through refresh meta-tags
Avoid using words like "link," to hypertext and give a link to your website

Here's the top 3 guidelines to avoid a penalty:
Don't buy links. Links passing SEO value to your site should look natural. ...
Don't overuse keywords. Stuffing your content with exact repetitions of a key phrase can hurt your search engine rankings. ...
Make original, quality content.