This article addresses the suitable approaches for empowering energy citizens and smart energy communities through the development of community-based microgrid (C-MG) solutions while taking into consideration the functional architectural layers and system integration topologies, interoperability issues, strategies for consumer-centric energy trading under the local electricity market (LEM) mechanism, and socio-economic aspects. Thus, this article presents state-of-the-art microgrid solutions for the smart energy community along with their motivation, advantages and challenges, comprehensibly contrasted between the recommended generic architecture and every other reported structure. The notion of LEM for peer-to-peer (P2P) energy exchange inside a transactive energy system based on a flexible consumer-centric and bottom-up perspective towards the participation in the wholesale electricity market (WEM) is also reviewed and critically explored. Furthermore, the article reviews the interoperability issues in relation to the development of C-MG including energy trading facilities. The article’s overall contribution is that it paves the path for advanced research and industrialisation in the field of smart energy communities through the analytical recommendations of the C-MG architecture and DER (distributed energy resource) integration structure, considering the future trend of local energy markets and socio-economic aspects.