We present a detailed microscopic investigation of fractional quantum Hall states with gapped boundaries in a coupled bilayer lattice model featuring holes whose counterpropagating chiral edge states are hybridized and gapped out. We focus on a lattice limit for cold-atom experiments, in which each hole just consists of a single removed site. Although the holes distort the original band structure and lead to ingap remnants of the continuum edge modes, we find that the lowest nearly flat band representing a higher-genus system may naturally form by controlling the local hopping terms that gap out the boundaries. Remarkably, local interactions in this new flat band lead to various Abelian and non-Abelian fractional quantum Hall states with gapped boundaries residing on emergent higher-genus surfaces, which we identify by extracting the nontrivial topological ground-state degeneracies and the fractional statistics of quasiparticles. These results demonstrate the feasibility of realizing novel fractional quantum Hall states with gapped boundaries even in the extreme lattice limit, thus enabling a possible new route towards universal topological quantum computation.